Liquidity
The ease with which an asset can be bought or sold without affecting the price.
Liquidity in the crypto context describes how easily a cryptocurrency can be bought or sold without significantly moving the price.
High liquidity (Bitcoin, ETH):
•High trading volume
•Narrow bid-ask spread
•Large order doesn't move price much
Low liquidity (small altcoins):
•Low volume, large spread
•Buying a large amount can significantly raise the price
•Selling can crash the price — "exit liquidity" problem
Liquidity in DeFi: liquidity providers (LP) deposit token pairs into DEX liquidity pools. In return they get a share of trading fees and potentially farming rewards. Risk: impermanent loss.