#Liquidity101
Liquidity is the lifeblood of any financial market, especially in crypto. It refers to how easily an asset can be bought or sold without significantly affecting its price. High liquidity means tighter spreads and faster execution, making the market more efficient and less volatile. In centralized exchanges (CEXs), liquidity is often aggregated from market makers or institutional traders, while decentralized exchanges (DEXs) rely on liquidity pools provided by users. Impermanent loss and slippage are key considerations in DEX liquidity provisioning. Liquidity also affects price discovery, arbitrage opportunities, and market manipulation resistance. Tokens with low liquidity are more prone to pump-and-dump schemes. Therefore, before trading or investing, one should always assess the depth of the order book or liquidity pool size. In essence, liquidity is not just a metric; it's a critical risk filter and strategic lever for both traders and projects alike.