#Liquidity101 Liquidity, in financial markets, refers to the ease with which an asset can be bought or sold without significantly impacting its price. Think of it as how "liquid" an asset is – how quickly it can be converted into cash.

High liquidity means there are many buyers and sellers, leading to tight bid-ask spreads (the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept). This allows for quick execution of trades at fair prices. Conversely, low liquidity means fewer participants, wider spreads, and difficulty in executing trades without causing significant price swings. Factors like trading volume, market depth, and the number of market participants influence liquidity.