Liquidity
How easily an asset can be bought or sold near its current price without moving that price much.
Liquidity is how quickly you can convert an asset to cash, or back, without shifting its price. Bitcoin is deeply liquid: you can sell a million dollars' worth on a major exchange and barely move the market. A thinly traded meme coin is not; a modest sell order can crater it.
Liquidity shows up as a tight spread and a deep order book. In decentralized finance it lives in pools that traders draw against. When liquidity dries up, prices gap, slippage widens, and exits get expensive exactly when you most want out.
Related terms
A pot of tokens locked in a smart contract that traders swap against, with prices set by a formula.
SpreadThe gap between the highest bid and the lowest ask, a basic measure of trading cost and liquidity.
SlippageThe difference between the price you expected on a trade and the price it actually executed at.
Order BookA live, ranked list of all outstanding buy and sell orders for an asset on an exchange.