#Liquidity101

#Liquidity101

Liquidity refers to how quickly and easily an asset can be bought or sold without significantly affecting its price. In simple terms, it measures market efficiency. Highly liquid assets—like major stocks, Bitcoin, or stablecoins like $USDC—can be traded instantly with minimal price slippage. On the other hand, low-liquidity assets may take longer to sell and could result in worse prices.

There are two main types of liquidity:

1. Market Liquidity – How easily assets can be traded in the market.

2. Asset Liquidity – How quickly a specific asset can be converted to cash.

Exchanges, especially CEXs, often show liquidity through order books and bid-ask spreads. DeFi platforms use liquidity pools, where users lock assets to enable smooth trading.

Good liquidity means tighter spreads, faster trades, and better prices. Poor liquidity can cause delays and losses.

#CryptoEducation #FinanceBasics #Liquidity101 #DeFiExplained