#Liquidity101 What is cryptocurrency liquidity

Cryptocurrency liquidity determines how quickly, easily, and with minimal losses one can sell or buy it on the market. A cryptocurrency with high liquidity usually has a large trading volume and a smaller gap between the buying and selling price. It is important to remember that the liquidity of cryptocurrencies can vary significantly depending on the market situation.

Indicators of cryptocurrency liquidity

There are several key indicators that help determine the liquidity of a cryptocurrency:

Trading Volume

Trading volume shows the amount of cryptocurrency that has been bought or sold over a certain period, usually 24 hours. High trading volume usually indicates high liquidity.

Market Depth

Market depth reflects the number of buy and sell orders for the cryptocurrency at various price levels. The more orders there are, the higher the liquidity.

Spread

The spread is the difference between the buying price and the selling price of the cryptocurrency. A narrow spread of a cryptocurrency means that the buying and selling prices of that currency are very close. This is a good sign of liquidity.