What is Liquidity?
How easily an asset can be bought or sold without moving its price.
Liquidity is how easily you can turn something into cash at a fair price. A liquid asset (like a major stock) has tons of buyers and sellers, so you can trade instantly. An illiquid one (like a house, or a tiny token) can take forever to sell and may crash in price when you try.
In crypto, 'liquidity' often refers to the pool of funds in a decentralized exchange that lets people trade a token. Thin liquidity means big price swings on small trades.
Before buying any small token, check its liquidity. Getting in is easy; getting out of an illiquid asset is where people get trapped.
Related terms
Definitions from the Business Dog Glossary — educational, occasionally satirical, never financial advice.