#Liquidity101 Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. It's a crucial concept in trading and investing, impacting everything from pricing to risk management.

High liquidity means that an asset can be quickly sold or purchased with minimal price changes. This is often seen in major stocks and popular cryptocurrencies, where a large number of buyers and sellers are active. High liquidity allows for smoother transactions and better price discovery.

Low liquidity, conversely, indicates that an asset is harder to trade. This might be the case for less popular stocks or smaller cryptocurrencies. In these situations, buying or selling can lead to significant price fluctuations, increasing the risk for traders.

Understanding liquidity is essential for making informed investment decisions. It affects trading strategies, execution speed, and overall market stability, so traders should always consider liquidity when entering or exiting positions.