What is Liquidity?
Liquidity refers to the ease with which an asset can be converted into cash or its equivalent without significantly affecting its market price. High liquidity means there’s a large volume of buyers and sellers, enabling quick and efficient transactions.
In the crypto world, liquidity plays a crucial role in determining how easily tokens can be traded on exchanges. Assets with high liquidity, like Bitcoin or Ethereum, tend to have stable prices and lower transaction costs. Conversely, low-liquidity assets are more volatile and harder to trade.
Strong liquidity is vital for healthy markets, ensuring efficiency and price stability.