#Liquidity101
๐ง Liquidity101: Why It Matters More Than You Think
Ever tried trading a coin and got a weird price fill? Thatโs liquidity in action โ or the lack of it.
Letโs break it down ๐
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๐น What is Liquidity?
Liquidity = how easily you can buy or sell an asset without impacting its price.
๐ High Liquidity
โ Tight bid-ask spreads
โ Faster execution
โ Lower slippage
โ More stable prices
โก๏ธ Found in popular pairs like BTC/USDT or ETH/BNB
๐ Low Liquidity
โ Wide spreads
โ Price jumps even on small trades
โ Higher risk of getting "rekt" on exits
โก๏ธ Common in low-cap altcoins or obscure tokens
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๐น Why Does It Matter?
* Traders: Better execution and reduced risk
* Investors: Easier entry/exit without moving markets
* Projects: High liquidity builds trust and adoption
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๐น CEX vs. DEX Liquidity
๐ฆ CEX (e.g., Binance)
๐ง Centralized order books
โ Typically deeper liquidity
๐ก๏ธ Ideal for active trading
๐ DEX (e.g., Uniswap)
๐ง AMM-based pools
๐ธ Liquidity depends on users staking tokens
โ ๏ธ Can be thin during low activity
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๐ฌ How do you check a token's liquidity before trading?
