#Liquidity101

Liquidity in finance refers to how easily an asset can be converted into cash without significantly affecting its market price. Think of it as the speed and efficiency of buying or selling.

* High Liquidity: Assets like cash, major stocks, or popular cryptocurrencies are highly liquid. You can buy or sell them quickly at a price close to their last traded value, with many buyers and sellers available. This leads to tighter bid-ask spreads and less price volatility.

* Low Liquidity: Illiquid assets (e.g., real estate, rare collectibles, thinly traded altcoins) are harder to sell quickly without a significant price discount.

Liquidity is crucial for efficient markets, enabling smooth transactions, fair pricing, and effective risk management for traders and investors.