What is Liquidity?

What is Liquidity?

The matter of liquidity takes regard to the easiness of trading an asset for another, like trading money for crypto coins.

What are Liquid Assets?

Liquid Assets are essentially assets able to be transferred for another asset almost immediately. To illustrate, crypto coins that are able to be traded or transferred to stablecoins easily are considered to be Liquid Assets. However, assets like property are less liquid as they are harder to be transferred into other assets.

What is a Liquid Market?

When markets are found offering buying or selling services for assets with high liquidity performance, they are considered to be Liquid Markets. Essentially, this is shown through the market’s inclusion of assets being traded at all times, which results in investors’ orders being matched at a consistent rate within a short period of time.

In contrast, markets that are not liquid would be unsaturated with trade orders, meaning that newly-input orders would take a certain amount of time before they are matched and considered successful.

With this taken into account, trading in Liquid Markets can be faster and much more efficient for investors that desire fast service and reasonable prices.

Such markets can be observed from the trade volume, as well as the number of traders present.


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