#Liquidity101

Liquidity in the crypto market refers to the ease with which a digital asset can be bought or sold without significantly impacting its price.

Think of it as how "smooth" the market is for a particular cryptocurrency.

High liquidity means there are plenty of buyers and sellers, leading to a narrow "bid-ask spread" (the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept).

This ensures quick transactions at stable prices, reducing "slippage" – the difference between your expected trade price and the actual execution price.

Conversely, low liquidity indicates fewer participants, resulting in wider spreads and volatile price swings, even for small trades.

Understanding liquidity is crucial for traders and investors to manage risk, ensure efficient entry/exit points, and avoid unexpected costs in the dynamic crypto landscape.