In the world of cryptocurrencies, liquidity is key. It is the ease with which you can buy or sell assets without affecting their price. High liquidity is a sign of a healthy, stable market.
The role and impact of liquidity
High liquidity leads to more stable prices, faster transaction execution, and lower transaction costs due to narrower spreads between buy and sell offers. The main consequence of low liquidity is slippage, which is the difference between the expected price of a transaction and the actual price at which it is executed. This often occurs with large orders in low-volume markets.
