#Liquidity101

**Liquidity 101**

Liquidity determines how easily an asset can be traded without causing significant price swings. In cryptocurrency, liquidity ensures seamless transactions, reducing volatility and price slippage. Higher liquidity means assets can be bought or sold quickly, while low liquidity may result in delayed trades and unpredictable pricing. Centralized exchanges (CEXs) and decentralized exchanges (DEXs) use liquidity pools to enable smooth trading. Market liquidity affects price stability, while accounting liquidity reflects financial health. Whether in traditional markets or crypto, liquidity plays a vital role in investment strategies, ensuring efficient and stable financial ecosystems.