#Liquidity101 Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. In simple terms, high liquidity means there's a large number of buyers and sellers, which makes transactions fast and efficient. For example, major cryptocurrencies like Bitcoin and Ethereum have high liquidity because they are frequently traded.

Low liquidity means fewer market participants and more price slippage, which can make it harder to buy or sell at the expected price. Liquidity is critical for traders because it affects order execution, spreads, and risk management.

In centralized exchanges (CEXs), liquidity is usually high due to the presence of market makers. In decentralized exchanges (DEXs), liquidity comes from liquidity pools. Traders must always consider liquidity when entering or exiting a position to avoid unexpected losses.