#Liquidity101 Liquidity (Liquidity) – what is it?

Liquidity means how easily an asset (e.g., cryptocurrency) can be bought or sold without causing significant price changes.

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🧠 Types of liquidity:

1. Market Liquidity:

Concerns a specific market (e.g., ETH/USDT pair)

The more buyers and sellers, the greater the liquidity

2. Asset Liquidity:

How quickly you can convert a given asset into cash without losing value

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📈 Why is liquidity important?

✅ Lower price slippage

✅ Faster order execution

✅ Smaller differences between buying and selling prices (spread)

✅ More stable market

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📊 High vs. Low liquidity

Feature High liquidity Low liquidity

Order execution Fast, with no major changes Slower, with slippage

Spread (price difference) Small Large

Price risk Low High

Example assets BTC, ETH New altcoins, niche tokens

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🌐 Liquidity on CEX vs. DEX

Feature CEX DEX

Source of liquidity Order book Liquidity pool

Liquidity providers Market makers Liquidity providers (LPs)

Typical platforms Binance, Kraken Uniswap, PancakeSwap

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🧪 What is a Liquidity Pool? (on DEX)

It is a pool of tokens that users add so others can trade.

For example, in the ETH/USDC pool, you get the opportunity to exchange ETH ↔ USDC, and liquidity providers earn from fees.

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💡 Conclusions:

Liquidity = a healthy and functional market

High liquidity = easier, cheaper, and faster trading

Pay attention to liquidity before entering a small or new token