#Liquidity101 Liquidity refers to how easily an asset can be converted into cash or another asset without significantly affecting its price. High liquidity indicates a market with many buyers and sellers, enabling quick trades at stable prices. Assets like cash or widely traded stocks are highly liquid, whereas real estate or collectibles are less so. In financial markets, liquidity is crucial for efficiency, reducing transaction costs and volatility. In cryptocurrency, liquidity ensures smooth trading and accurate price discovery. Factors like trading volume, market participants, and order book depth affect liquidity. Low liquidity can lead to price manipulation and higher trading risks.