Liquidity is an economic state of an asset that dictates how easily a position in it can be entered & exited. Liquidity is a telltale sign of an asset’s open market demand, where high liquidity denotes high interest & low liquidity denotes low interest. Liquidity can be thought of as the trade-off between how quickly an asset can be sold and how much its price will fluctuate as a result of the sale. 

     The term Liquidity itself is derived from the fluid properties of water, so when the term is being used it comes in handy to imagine the spilling of water between cups.

      Related Terms:



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