#Liquidity101

Liquidity refers to how easily an asset can be bought or sold without affecting its price. Highly liquid assets like major stocks or Bitcoin can be traded quickly with minimal price impact, while illiquid assets (e.g. rare NFTs or small-cap tokens) are harder to trade and may have large price swings. In trading, good liquidity means tighter spreads, faster execution, and less risk. Centralized exchanges often offer deeper liquidity through market makers, while decentralized exchanges rely on liquidity pools. For investors, high liquidity reduces slippage and improves efficiency. Always check an asset’s volume and order book depth—poor liquidity can trap you in or out of trades.