## 🧵 Thread: Understanding Liquidity in Crypto Markets

### 1. What is Liquidity?Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. High liquidity means assets can be quickly converted to cash with minimal price impact, while low liquidity indicates a more challenging and potentially more expensive process.

### 2. Buy-side LiquidityBuy-side liquidity involves the volume of buy orders at various price levels in the order book. High buy-side liquidity suggests there are many potential buyers ready to purchase the asset, which typically stabilizes the price and reduces volatility.

### 3. Sell-side LiquiditySell-side liquidity pertains to the volume of sell orders at different price points. High sell-side liquidity indicates numerous sellers are willing to offload their assets, contributing to a smoother selling process and less price slippage.

### 4. Internal & External Liquidity- Internal Liquidity: This is liquidity provided within a specific exchange or platform. It relies on the active buy and sell orders from the users of that particular platform.- External Liquidity: This is the overall liquidity available in the broader market. It includes liquidity from multiple exchanges, market makers, and financial institutions, ensuring that even if one platform has low liquidity, the asset can still be traded efficiently through other channels.

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