#CircleIPO When an asset can be converted into cash effectively without affecting its market value, it is considered a liquid asset. The ability to convert quickly and efficiently is referred to as liquidity. Therefore, the availability of cash to carry out such conversions is the greatest influence on whether a market can operate effectively. The more liquid an asset is, the easier and more efficient it is to convert back into cash. Less liquid assets take longer and may incur higher costs.

Liquidity describes the extent to which an asset can be bought or sold quickly in the market at a price that reflects its intrinsic value. Tangible assets, such as real estate, fine art, and collectibles, are relatively less liquid. Other financial assets, ranging from stocks to cooperative units, occupy various positions on the liquidity spectrum.