#Liquidity101 đŚ What is Liquidity?
High Liquidity: If a market is highly liquid, assets can be quickly bought or sold without causing significant price changes. Stocks of major companies like Apple or Bitcoin (BTC) typically have high liquidity.
Low Liquidity: If an asset has low liquidity, it can be harder to execute large trades without affecting its price. Small-cap altcoins or niche stocks might have low liquidity.
đ Types of Liquidity
Market Liquidity:
The ability to buy or sell an asset in the market without significant price fluctuations.
Example: If there are lots of buy and sell orders for BTC at similar prices, the market is liquid.
Funding Liquidity:
Refers to the ease with which traders or institutions can access funds for trading. In crypto, funding liquidity might refer to the ability to leverage positions on exchanges.
Asset Liquidity:
Measures how quickly an asset can be converted into cash without losing its value.
Example: Cash is the most liquid asset, while real estate is less liquid.
