What is Liquidity

The liquidity of an asset refers to the level of ease it can be transformed into cash. Assets that can be quickly sold and exchanged for cash are liquid assets.

For cryptocurrencies, liquid cryptocurrencies are those that can be easily sold in exchange for fiat currency. Bitcoin is the most liquid cryptocurrency.

Liquid markets are markets where there are always willing buyers and sellers of a certain asset. As a result, assets can be sold in little time. These markets are characterized typically with a lower spread. Liquid markets are competitive markets; therefore, the assets are sold at market price, and premiums or discounts are unlikely. Forex represents the most liquid market, with huge daily trading volumes.