{"id":6677,"date":"2020-01-18T09:30:49","date_gmt":"2020-01-18T09:30:49","guid":{"rendered":"https:\/\/qa-front.dev.techhub.cloud\/blog\/?page_id=2921"},"modified":"2024-04-17T12:36:12","modified_gmt":"2024-04-17T12:36:12","slug":"what-is-liquidity","status":"publish","type":"glossary","link":"https:\/\/paybis.com\/blog\/glossary\/what-is-liquidity\/","title":{"rendered":"Liquidity"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Read on to learn what is liquidity in crypto. We will also explore how it\u2019s measured and how it determines the value of a coin.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">What is liquidity\u00a0in cryptocurrency and how is it measured?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Liquidity describes the rate at which cryptocurrency can be bought or sold on the market.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To measure the liquidity of a given cryptocurrency, one should look at 3 important metrics in the cryptocurrency market:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>24-hour <\/b><a href=\"https:\/\/bitsgap.com\/blog\/what-is-a-trading-volume-in-cryptocurrency-and-why-is-it-important\/\"><b>trading volume<\/b><\/a><span style=\"font-weight: 400;\"> &#8211; higher is always better.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Exchange availability<\/b><span style=\"font-weight: 400;\"> &#8211; the more exchanges that list a particular coin, the higher the liquidity.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>The bid-ask spread<\/b><span style=\"font-weight: 400;\"> &#8211; the difference between the lowest selling (ask) price and the highest buying (bid) price. The lower this number is, the more liquid the coin.\u00a0\u00a0<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">What conclusions can we draw when looking at a coin\u2019s liquidity?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">When looking at cryptocurrencies, we can conclude that high-liquidity coins are more popular and much more interesting for traders.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is because they allow for a quick entrance and exit in the market, which is important in the high-volatility environment of cryptocurrencies.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When investing in low-liquidity cryptos, you might be unable to sell them at your asking price.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furthermore, if the price of a low-liquidity coin starts dropping, and you can\u2019t sell it on an open market, you will end up with losses.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Therefore, remember to <\/span><a href=\"https:\/\/paybis.com\/blog\/what-is-dyor\/\"><span style=\"font-weight: 400;\">DYOR<\/span><\/a><span style=\"font-weight: 400;\"> and ensure that your coin has at least some liquidity before making a purchase.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Exchange liquidity vs Coin liquidity\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Now that we know how a coin\u2019s liquidity can impact your investment, let\u2019s look at the liquidity of exchange platforms.<\/span><\/p>\n<p><b>A liquid exchange is a platform with many active traders.<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The coin\u2019s liquidity won\u2019t mean much if you are trading it on an exchange with low liquidity and can\u2019t find investors to trade with.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A good indicator of an exchange\u2019s liquidity is its 24-hour volume and the number of cryptocurrency pairs it supports.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Liquidity describes the rate at which cryptocurrency can be bought or sold on the market.<\/p>\n","protected":false},"featured_media":0,"template":"","glossary_letter":[294],"glossary_term":[276,284,285],"class_list":["post-6677","glossary","type-glossary","status-publish","hentry"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is Liquidity in \u0421ryptocurrency- Blockchain FAQs Explained - Paybis Blog<\/title>\n<meta name=\"description\" content=\"In this article we explain what is liquidity in the context of cryptocurrency. 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