What is "Liquidity" and why it matters
Ever tried to sell something online and it just sat there for ages, or wanted to buy a specific item but no one was selling? That frustrating feeling is exactly what 'low liquidity' feels like in crypto, and it’s way more important than you might think!
Imagine you're at a bustling farmers' market, full of buyers and sellers for every kind of fresh produce.
You want to sell your homemade jam, and someone immediately wants to buy it at a fair price!
This easy buying and selling, where transactions happen smoothly without big price changes, is what we call 'liquidity' in crypto.
But, what if you showed up to an empty market trying to sell your jam?
You'd either wait forever for a buyer or have to slash your price dramatically just to make a sale.
Therefore, good liquidity means you can swap your crypto, like UNI tokens on Uniswap, for another asset quickly and at a price close to what you expect.
Without it, you might get stuck with an asset or be forced to accept a much worse deal, which can feel super scary when you're trying to move your funds!
Knowing about liquidity helps you understand why some coins are easier to trade than others and why certain platforms are better for quick swaps.
Now you know why those popular markets are always buzzing!
#CryptoTips #Liquidity #HowItWorks #defi
- Disclaimer: Sharing knowledge and insights as part of learning and growing together. For educational purposes only, not financial advice.