#Liquidity101

Liquidity refers to how easily you can buy or sell an asset without significantly affecting its price.

🔼 High liquidity = Lots of buyers and sellers, trades happen fast, and the price stays stable.

🔽 Low liquidity = Fewer market participants, harder to trade quickly, and large trades can cause price swings.

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🔁 Real-Life Example:

✅ High Liquidity

You want to sell 1 BTC on Binance:

Tons of buyers → trade happens instantly at near-market price.

❌ Low Liquidity

You try to sell a rare altcoin on a small exchange:

Few buyers → you might have to sell at a much lower price, or wait a long time.

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📊 Why Liquidity Matters

Reason Why It’s Important

Fast execution Orders are filled quickly.

Stable prices Less slippage (unexpected price changes).

Fair value Prices reflect real market demand/supply.

Lower spread The gap between buy/sell prices is smaller.