#Liquidity101

The matter is more important than you think

Liquidity is not just a technical term; it is the backbone of cryptocurrency trading. This article explains what liquidity is, why it affects your profits, and how to avoid falling into the trap of low liquidity.

Most traders focus solely on the price, but if you ignore liquidity, you are missing half the picture.

Here’s why liquidity is important in cryptocurrencies and how it can contribute to the success or failure of your trades:

What is liquidity?

Liquidity means the ease of buying or selling a currency without significantly affecting its price.

Simply put:

High liquidity = fast trades, narrow spreads, stable prices

Low liquidity = slippage, delayed executions, and unexpected losses

Real-life example:

Let’s assume that the price of Bitcoin (BTC) is trading at $103,771 on a high-volume trading pair like BTC/USDT.

You place a buy order for $10,000. It gets filled almost immediately at the expected price. Smoothly.

Now try that with a low liquidity altcoin on a random pair.

Buying $10,000 worth of market may cover large parts – and you end up buying at a price 3-5% higher than the market. That’s slippage caused by poor liquidity.

Why this matters to you:

• Your trades are executed faster

• You avoid unwanted price spikes or drops

• You get fairer prices when entering and exiting.