Liquidity in crypto: why is it even important?

Okay, imagine: you want to sell your bitcoin right now. You go to the exchange, hit the “sell” button — and in a second, a buyer appears at a normal price. This is liquidity. Now imagine a second scenario: you want to sell some unpopular coin, and there’s no one in the order book. Either you wait for hours, or you drop the price by 50% so that someone finally buys it. This is low liquidity.

How to measure it?

Three main indicators:

• Trading Volume — how much money is circulating daily. BTC trades in trillions, while an unknown coin can be in the hundreds of thousands.
• Spread — the difference between the buying and selling price. The smaller it is, the better for you.
• Order book — if it is full of orders, you will quickly execute your trade.

Why does this affect the price?

In low-liquidity markets, one large player can dump a coin and cause a crash. In high-liquidity (BTC, ETH, large exchanges) the price changes smoothly because there are many transactions that balance each other out.

Conclusion: choose liquid assets and reputable exchanges. This reduces the risk of getting stuck with a position that you cannot sell.