Understanding Liquidity in Crypto Markets #Liquidity101

Liquidity refers to how easily an asset can be bought or sold without significantly affecting its price. In crypto markets, high liquidity means tighter bid-ask spreads and faster trade execution, typically seen in major tokens like Bitcoin and Ethereum. Low-liquidity assets often experience higher volatility and slippage, making trades more costly.

Liquidity pools in decentralized exchanges allow users to supply tokens for trading pairs, earning fees in return. Market makers and arbitrageurs also help maintain liquidity. For traders, checking volume and order book depth before entering positions is essential to minimize risks.