What is liquidity and why is it such an important factor in the crypto market or any market for that fact ?
Liquidity and reserves goes hand in hand, healthy reserves means healthy liquidity.
It is a measure of the ability of a market or institution to process the movement of resources with ease. In a real market scenario, it measures the balance between sellers and buyers or the balance in the value of buy and sell orders. If these two factions are balanced and have sufficient resources to handle a shift in demand from either direction, a sufficiently liquid market is achieved. Liquidity theories apply to every commodity market and work in just about the same way.
Why is it so very important to look at the liquidity of a crypto coin/token/project even an exchange when doing your research ?
Crypto coins/tokens/projects at risk of low liquidity are low cap, less popular crypto assets, and when looking to trade these on a decentralized exchange, traders may first want to evaluate the liquidity pool data and ensure that available liquidity is enough to run their trade request with little or no slippage.
If slipage is high, it normally points to low liquidity and extremely high risk. In such a case it is advisable to rather stay away from such a crypto coin/token/project.
Don't take unnecessary risks, it's never sensible.
