#Liquidity101 What is liquidity in trading?

Liquidity is the ability of an asset to be quickly sold or bought without significantly impacting its price. The higher the liquidity, the easier it is to execute a transaction at the current market price.

For example, Bitcoin has high liquidity because there is a large demand and supply for it — meaning it can be easily sold or bought at any moment. On the other hand, lesser-known tokens may have low liquidity: if you try to sell them, you may have to either wait for a buyer or lower the price.

In the market, liquidity is important for traders and investors, as it affects risks, spreads (the difference between the buying and selling price), and the speed of transaction execution.