Okuzeka
Blockchain & Crypto vocabulary · Exchanges & Trading

Liquidity

Meaning in blockchain & crypto, with examples

/lɪˈkwɪd.ə.ti/nounCore term

In blockchain & crypto, liquidity means: How easily an asset can be bought or sold quickly without moving its price much. In DeFi, it also means the funds that users deposit into pools so that others can trade.

In Turkish: likidite, nakde çevrilebilirlik

How it is used

Traders talk about high or low liquidity, deep or thin liquidity, and liquidity drying up. In DeFi you provide or add liquidity and remove it later; people who do this are liquidity providers (LPs). Low liquidity usually means wider spreads and more slippage.

Example sentences

  1. Liquidity is very thin on that pair, so a large order could move the price a lot.

  2. We added liquidity to the pool on launch day so that early users could trade.

Common collocations

  • provide liquidity
  • low liquidity
  • deep liquidity
  • liquidity provider
  • remove liquidity
  • liquidity poolA smart contract that holds two or more tokens which traders can swap against. Users who deposit tokens into it earn a share of the trading fees.
  • slippageThe difference between the price you expect when you place a trade and the price at which it is actually completed, usually caused by low liquidity or fast price moves.
  • order bookA live list of all open buy and sell orders for a trading pair, sorted by price. It shows what buyers will pay, what sellers want and how much is available at each price level.
  • market capShort for market capitalization: the total value of a cryptocurrency, found by multiplying its current price by the number of coins in circulation.
  • trading pairTwo assets that can be traded directly against each other on an exchange, such as ETH/BTC. The price shows how much of the second asset you need for one unit of the first.

This word in other fields

The same English word can have a different meaning in another field:

More terms: Exchanges & Trading

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