#Liquidity101

I look at things. Liquidity and Market Capitalization.

Liquidity is essential in the world of cryptocurrencies, as it determines the ease with which an asset can be bought or sold without significantly affecting its price. In markets with high liquidity, transactions are executed quickly and with lower volatility. In contrast, in environments with low liquidity, prices can fluctuate sharply and generate unexpected losses.

A specific case occurred in May 2022 with the collapse of Terra (LUNA). When investors began to sell massively, liquidity disappeared quickly, leading to a near-total collapse of the price. Sell orders could not find buyers, and exchanges could not maintain stability. This event showed how the lack of liquidity can amplify a crisis and destroy the value of a project in hours.

Therefore, reliable platforms, large trading volumes, and active participation are key to maintaining the health and stability of any token.