Liquidity

Liquidity refers to how easily an asset can be bought or sold in a market without causing a big shift in its price. When an asset is highly liquid, its order book is filled with enough buy and sell orders at various price levels (good market depth) to handle large trades with minimal price movement. This lets traders buy or sell substantial amounts quickly, with less chance of sudden price changes.

On the other hand, assets with low liquidity have fewer orders in the book, so big trades can lead to large and unexpected price swings—this is known as slippage. Traders may attempt to reduce slippage by spreading out their trades over time, but this can bring the risk of unfavorable price changes during that period.

Typically, an asset’s trading volume is a strong indicator of its liquidity. It's normal for the liquidity available to buy and sell to differ slightly, but the difference is usually small in well-functioning markets.