#Liquidity101

Liquidity refers to how easily an asset can be bought or sold without affecting its price. High liquidity means there are many buyers and sellers, allowing fast, smooth transactions with minimal price slippage—common in popular assets like Bitcoin or major stocks. Low liquidity means fewer participants, leading to slower trades and larger price swings. Liquidity is crucial for traders—it affects entry and exit efficiency, spreads, and overall market stability. Centralized exchanges usually offer higher liquidity, while decentralized ones may vary. Always check volume and order book depth before trading. Understanding liquidity can help you avoid costly mistakes and improve trading outcomes.