#Liquidity101

Liquidity in crypto is an important concept, referring to the ease and speed with which a cryptocurrency asset (like Bitcoin, Ethereum...) can be bought or sold on the market without significantly affecting its price.

⸻

🔍 Simply put:

• If a coin/token has high liquidity → you can buy or sell large amounts without significantly changing the price, and the transaction process is quick.

• If liquidity is low → transactions may take time, the buy/sell spread is high, or it may be difficult to find buyers/sellers.

⸻

📊 Liquidity is affected by:

1. Trading volume (Volume)

• High volume = high liquidity.

• For example: BTC and ETH have large trading volumes daily → high liquidity.

2. Number of buyers and sellers (Market depth)

• Many participants in trading → easy order matching → high liquidity.

3. Exchanges and popular trading pairs

• Tokens available on many major exchanges (Binance, Coinbase…) will have better liquidity.

• Tokens only available on a few small DEXs may be difficult to trade quickly.

4. Technology supporting liquidity (Liquidity pools in DeFi)

• In DeFi, users can provide liquidity for trading pairs → creating liquidity pools that help others trade more easily.