Liquidity is a measure of how easily an asset can be bought or sold without affecting its price. In crypto markets, high liquidity means tighter spreads and less price slippage during trades. Liquidity pools on decentralized exchanges enable continuous trading by aggregating funds from users, rewarding them with fees. Low liquidity can lead to volatile prices and difficulty executing large trades. For traders and investors, understanding liquidity helps in selecting assets and exchanges, ensuring smoother and more cost-effective transactions.
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