Liquidity is a term widely used in finance and can have various meanings in different contexts. In general, liquidity can be divided into the following concepts: 1) An asset's ability to be convertedLiquidity is a term widely used in finance and can have various meanings in different contexts. In general, liquidity can be divided into the following concepts: 1) An asset's ability to be converted

Akademi/Cryptocurrency Knowledge/DeFi/Basic Knowl...f Liquidity

Basic Knowledge of Liquidity

Jul 16, 2025

Paylaş

#Basic #Beginners #Basic Concepts

FLOW$0.08066-8.10%

SCARCITY$0.0162-6.89%

MORE$0.00195-6.42%

BID$0.01752-5.65%

ORDER$0.0778-7.27%

Liquidity is a term widely used in finance and can have various meanings in different contexts. In general, liquidity can be divided into the following concepts:

1) An asset's ability to be converted into cash. This refers to the capability to convert existing assets or wealth into other assets.

2) The strength of an entity's ability to meet its debt obligations. Commonly used for businesses, good liquidity indicates that a company has ample cash flow from its assets.

3) The abundance or scarcity of monetary supply in the market. This applies to the macroeconomic domain. If the total money supply is greater than the total demand, it signifies excess liquidity.

In cryptocurrency trading, liquidity refers to the first type of situation. Additionally, the liquidity in crypto markets can generally be categorized into on-chain liquidity and centralized exchange liquidity, among others. This article focuses on the liquidity of centralized exchanges.

1. What is Cryptocurrency Liquidity?

As mentioned earlier, liquidity is a significant concept in financial trading, referring to the ability to convert existing assets or wealth into other assets. In the context of cryptocurrency trading, liquidity specifically refers to the ease with which a particular cryptocurrency can be converted into fiat currency or other cryptocurrencies.

Liquidity plays a crucial role in the cryptocurrency market. If a cryptocurrency has high liquidity, users' buying and selling have a minimal impact on the market, avoiding significant price fluctuations. Conversely, low liquidity for a cryptocurrency can lead to substantial market fluctuations due to users' buying and selling, resulting in significant price increases or decreases. Additionally, in markets with higher liquidity, it's usually easier to buy and sell. This is because liquidity is provided by market participants, and more participants lead to better liquidity, which in turn leads to more buy and sell orders, making it easier for users to execute trades. On the other hand, low liquidity often means that users' orders are relatively challenging to execute.

2. How to Assess Liquidity

Generally, there are two easy ways to assess liquidity:

Bid/Ask Spread: This refers to the price difference between the highest bid (buy) price and the lowest ask (sell) price. Typically, a smaller spread indicates higher liquidity.

Market Depth: This involves the quantity of buy and sell orders in the order book. Generally, a larger number of buy and sell orders indicates higher liquidity.

3. Factors Affecting Liquidity

The direct factor affecting liquidity is trading volume. In addition, there are indirect factors such as the regulatory environment and market sentiment. Indirect factors influence changes in trading volume, which ultimately leads to changes in liquidity.

3.1 Trading Volume

Trading volume is the direct factor that affects liquidity. The size of the trading volume is proportional to the number of buy and sell orders. The larger the trading volume, the greater the number of buy and sell orders, which means there are more market participants and higher liquidity for the token. Users can more easily exchange assets.

For users trading on an exchange, they will inevitably take on the role of either a maker or a taker. Makers increase liquidity, while takers consume liquidity.

3.2 Market Sentiment

Market sentiment can be divided into positive and negative sentiment. Positive sentiment often boosts investor confidence, triggering market transactions due to fear of missing out, which increases market liquidity. Negative sentiment has a detrimental effect, increasing investor fear and potentially reducing market transactions, thereby lowering liquidity.

Disclaimer: This information does not provide advice on investment, taxation, legal, financial, accounting, consultation, or any other related services, nor does it constitute advice to purchase, sell, or hold any assets. MEXC Learn provides information for reference purposes only and does not constitute investment advice. Please ensure you fully understand the risks involved and exercise caution when investing. The platform is not responsible for users' investment decisions.

Piyasa Fırsatı

FLOW Fiyatı(FLOW)

$0.08066

$0.08066$0.08066

-0.01%

USD

FLOW (FLOW) Canlı Fiyat Grafiği

Popüler Makaleler

Hyperliquid (HYPE) Analysis: Can $141B Volume Absorb the $219M Unlock Shock?

Executive Summary (TL;DR)Is Hyperliquid (HYPE) a buy despite the volatility?Verdict: Neutral / Watchlist. While Hyperliquid has achieved a record-breaking $141.4B in monthly volume—solidifying its dom

2026/01/21

Chainlink ETF Approved: LINK Price Prediction & Liquidity Analysis 2026

Executive Summary (TL;DR)Is the new Bitwise Chainlink ETF (CLNK) a buy signal?Yes. The SEC's approval of the Bitwise Chainlink Spot ETF (Ticker: CLNK) on January 14, 2026, marks a pivotal institutiona

2026/01/21

Can Stargate (STG) Regain Price Momentum Through veSTG Incentives in 2026?

As the cross-chain interoperability landscape matures in 2026, Stargate Finance (STG) stands at a critical juncture following its acquisition by the LayerZero Foundation. For investors, one question l

2026/01/20

StableChain (STABLE) Market Analysis: On-Chain Data vs. Growth Potential

Key TakeawaysInnovation: StableChain eliminates the need for volatile assets like ETH or SOL by using USDT as its native gas token for transaction fees.Bearish Signal: Despite a high-profile December

2026/01/20

Popüler Haberler

Daha Fazla Göster

3M Reports Fourth-Quarter and Full-Year 2025 Results; Initiates Full-Year 2026 Financial Guidance

Q4 GAAP sales of $6.1 billion, up 2.1%; operating margin of 13.0%, down 510 bps; EPS of $1.07, down 20%, all YoY Adjusted sales of $6.0 billion with organic growth

2026/01/20

Benzinga and Options Flow Establish New Data Relationship to Expand Access to Institutional Options Activity

DETROIT and NEW YORK, Jan. 20, 2026 /PRNewswire/ — Benzinga, a leading financial media and data provider, today announced a new data relationship with Options Flow

2026/01/20

Your Warehouse Could Be Killing Your Cash Flow, Here’s What To Do

What if the biggest threat to your cash flow isn’t a lack of sales but how your warehouse operates behind the scenes? Inventory that sits too long, space that isn

2026/01/20

Glassnode: Bitcoin's pullback from recent highs reflects weakening momentum, not a deterioration in the trend.

PANews reported on January 20th that, according to Glassnode's weekly market analysis report released on Monday, the flow of funds into US spot Bitcoin ETFs reversed

2026/01/20

İlgili Makaleler

Can Stargate (STG) Regain Price Momentum Through veSTG Incentives in 2026?

2026/01/20

Spot Trading vs. Futures Trading: A Beginner's Guide to Determining Which is Right for You

As the cryptocurrency market continues to mature, the diversification of trading tools has become a key factor in building robust investment strategies. Among global mainstream crypto exchanges, MEXC

2026/01/19

How to Trade Futures on MEXC App: Complete Beginner's Guide

MEXC Futures trading offers MEXCers an advanced way to trade cryptocurrencies. Unlike Spot trading, Futures trading has its own unique logic and order-opening mechanisms. This article is designed to h

2026/01/19

Crypto Futures Trading for Beginners: Complete Guide & Strategies

In this article, you will use MEXC Learn to explore the fundamentals of futures trading. This simple guide will help you easily understand the derivatives market and learn about the Futures trading pr

2026/01/19

Hemen Hesap Açın ve 10.000 USDT'ye Kadar Bonus Kazanın