What is the liquidity of an asset?
Some assets are easier to trade than others, depending on how liquid they are. Liquidity is a measure of the ease with which you can trade an asset (buy or sell) or turn an asset into cash or conversely sell an asset for cash. In general, the more liquid an asset is, the easier it is for you to get your hands on it and use it. Linking the issue of liquidity precisely to the crypto market, how easy it is for you to buy and sell a particular token is its liquidity. That is most importantly not running out of buyers or sellers and always having the order book filled with both buyers and sellers with a reasonable spread. The spread is simply the difference between the latest buying and selling price and the difference must not be that wide for a more liquid market.
How Does Liquidity affect a particular cryptocurrency or an asset??
Well, if an asset is easy to move and therefore more liquid than others, you can sell it more easily. So if highly liquid crypto is trading at $100 you can more easily buy and sell and as well convert it to cash than crypto at $50 given that, the measure of each price was given a similar condition to grow in market capitalization. Another way liquidity affects your assets is if you are selling or buying you get to compare prices or have a fair price comparison.
How do you determine the liquidity of particular crypto for yourself??
To determine the liquidity of a token, we have to understand what liquidity is. We need to understand how easy it is for buyers and sellers to buy and sell the token and also how easy is it for investors to convert (buy/sell/convert) a particular token into cash.
What happens when an asset Is less liquid or more liquid??
Well, more liquid assets will tend to be traded at higher prices compared with less liquid ones.
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