Liquidity
How easily an asset can be bought or sold in size without causing a large price move.
Liquidity measures how readily buyers and sellers can trade an asset near the quoted price. Deep liquidity means large orders can execute with limited slippage; thin liquidity means even modest orders can move the market.
Liquidity affects execution cost, volatility, price discovery, and the reliability of market data. High liquidity usually means tighter spreads and lower slippage, while low liquidity can make prices easier to manipulate.
Common liquidity measures include bid-ask spread, order book depth, trade volume, realized slippage, pool total value locked, and available lending supply. Volume alone can be misleading if it is wash traded or concentrated on one venue.
Liquidity can come from centralized exchange order books, decentralized liquidity pools, market makers, lending markets, and over-the-counter desks. Fragmented liquidity across venues can make routing and pricing harder.
Related terms
4 linkedExplore connected entries beyond the alphabetical index.
Cryptocurrency Exchange
→A cryptocurrency exchange is a platform for buying, selling, or trading digital assets through crypto or fiat markets.
Decentralized Exchange
→A decentralized exchange (DEX) lets users trade digital assets from their wallets through smart contracts or peer-to-peer settlement.
Bid-Ask Spread
→The difference between the highest bid and lowest ask price for an asset.
Kimchi premium
→A regional crypto price premium where assets trade higher on South Korean exchanges than on global markets.
All terms and definitions may update as the Cryptionary improves.
