Liquidity101

Liquidity is a measure of how easily and quickly cryptocurrency can be bought or sold at a stable, fair market price without causing significant fluctuations in that price.

Why is liquidity important on a cryptocurrency exchange?

Smooth transactions, price stability, reduced slippage, fair market price, reduced risks, attractiveness to investors. Liquidity is an indicator of the health of a cryptocurrency exchange.

Summary:

To determine the liquidity of a specific cryptocurrency pair on an exchange, you need to:

* Look at the trading volume: The higher, the better.

* Evaluate the spread: The smaller the difference between the buying and selling price, the better.

* Check the market depth (order book): The more orders with large volumes at different levels, the better.

These three key indicators will allow you to assess the liquidity of the asset accurately and make an informed trading decision.