Liquidity is a fundamental concept in financial markets, especially in the world of cryptocurrencies. It refers to how easily an asset can be converted into cash without significantly affecting its price. The more liquidity a market has, the easier it is to buy or sell without large price fluctuations.

For example, Bitcoin tends to have high liquidity due to the large volume of daily transactions. In contrast, lesser-known tokens may exhibit low liquidity, which implies greater risk for investors.

A good understanding of liquidity helps in making informed decisions, managing risks, and optimizing trading strategies.

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