#Liquidity101

#Liquidity101

Liquidity in crypto refers to how easily a digital asset can be bought or sold without affecting its price. High liquidity means there are many buyers and sellers, so trades happen quickly and at stable prices. Popular coins like Bitcoin and Ethereum usually have high liquidity on major exchanges.

Low liquidity means fewer market participants, which can lead to price slippage—where you get a worse price than expected. This is common with lesser-known altcoins or on smaller exchanges.

Liquidity is crucial for traders and investors. It ensures smoother entry and exit from positions, tighter spreads (the difference between buy and sell prices), and less volatility during trades. Centralized exchanges (CEXs) often offer higher liquidity due to large user bases and order books. Decentralized exchanges (DEXs) rely on liquidity pools, which are funded by users.

In short, higher liquidity means better trading conditions—faster, more efficient, and with fairer prices.