#Liquidity101 What is Liquidity?

Liquidity is the ability of an asset to be quickly and easily bought or sold in the market without causing significant price changes. The higher the liquidity of an asset, the easier it is to transact at a fair price.

Key Components of Liquidity

Trading Volume: The amount of assets traded over a specific period. High volume usually means high liquidity.

Bid-Ask Spread: The difference between the buying price (bid) and the selling price (ask). A small spread indicates good liquidity.

Market Depth: The number of buy and sell orders at various price levels. A deep market indicates high liquidity.