#Liquidity101 Liquidity is a key indicator that determines how quickly and with minimal losses an asset can be bought or sold. It plays a crucial role in trading and investing.
**Why is liquidity important?**
1. **Smaller spreads** — highly liquid pairs (for example, BTC/USDT) have a low difference between the buying and selling price, which reduces costs.
2. **Fast transactions** — an asset with good liquidity can be quickly converted without significant price changes.
3. **Market stability** — high liquidity prevents sharp price fluctuations (whipsaws).
**Where to look for liquidity?**
- Major exchanges (Binance, Coinbase) usually offer better liquidity.
- DEX (Uniswap, PancakeSwap) may have lower liquidity for rare tokens
