#Liquidity101 *Liquidity* in cryptocurrency refers to how easily a digital asset can be bought or sold in the market without affecting its price. A highly liquid market has many buyers and sellers, making it easier to enter or exit positions quickly at stable prices. Bitcoin and Ethereum are examples of highly liquid cryptocurrencies, as they are traded frequently on most major exchanges.

Liquidity is essential for smooth trading, price stability, and reduced slippage. When liquidity is low, large orders can cause significant price movements, increasing risk and trading costs. For traders and investors, high liquidity means faster transactions, tighter spreads (difference between buy and sell prices), and more predictable pricing.

On centralized exchanges (CEX), liquidity is often provided by market makers and large user bases. On decentralized exchanges (DEX), liquidity comes from liquidity pools, where users lock their crypto assets in smart contracts to enable trading and earn rewards or fees.

Low liquidity can be a warning sign, especially for new or lesser-known tokens. It may lead to difficulty in selling, price manipulation, or high volatility.