Liquidity refers to how easily an asset can be converted into cash without significantly affecting its price. It is a fundamental concept in finance and investment.

- Market Demand: High demand for an asset increases its liquidity.

- Market Conditions: Economic crises can reduce liquidity.

- Regulatory Environment: Regulations can affect the ease of trading assets.

Understanding liquidity is essential for making informed investment decisions and effectively managing risk. Always ensure to assess an asset's liquidity before investing.