What is liquidity?

What is liquidity?

Liquidity is provided by the general trading activity of investors, who are ready to provide the necessary level of demand for the asset at any time.

There are two levels of liquidity:

• low level (when there is no residual demand for the asset, the investor has to wait for a price drop to sell, there is a time lag on transactions, and high volatility of the asset price)
• high level (high trading activity on the asset, demand from investors, sufficient volume to instantly convert the asset into fiat or other cryptocurrencies, moderate level of price volatility).

High liquidity is the main aspect of the harmonious development of the market and the ideal conditions for trading the asset. Several key factors affect liquidity:

• Cryptocurrency/token trading activity, trading volume;
• the number of trading opportunities (exchanges and exchanges that provide a service for the selected asset);
• technological advantages of use;
• crypto positive laws of countries and jurisdictions.