In cryptocurrency trading, liquidity refers to the ability of an asset to be bought and sold quickly at a reasonable price without significantly affecting the market price. High liquidity means active buy and sell orders, allowing for quick transaction execution; low liquidity can lead to slippage, causing the actual transaction price to deviate from expectations, and even result in incomplete trades, especially when market volatility increases the risk.

To assess liquidity, one can check the depth chart of the trading pair, observing the number of buy and sell orders and their price distribution. A large number of orders with a small spread indicates good liquidity; one can also refer to trading volume, as high trading volume often corresponds to high liquidity.

To reduce slippage, these strategies can be employed: avoid trading during periods of high market volatility; choose trading pairs and platforms with good liquidity; split large orders into smaller ones to minimize market impact; use limit orders to accurately control transaction prices instead of blindly chasing market orders, ensuring that trading costs are manageable and execution is smoother.