Liquidity

Liquidity refers to how easily an asset, such as cryptocurrency, can be bought or sold in the market without affecting its price. A highly liquid market is one with a large number of buyers and sellers, ensuring that trades can be executed quickly and efficiently at stable prices. In contrast, a market with low liquidity can experience significant price fluctuations even with small trades, making it more volatile. Liquidity is critical in both centralized and decentralized exchanges, as it ensures that traders can enter and exit positions with ease. High liquidity also generally results in lower transaction fees and better market efficiency.