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What is Liquidity?

A cryptocurrency's liquidity gauges how quickly transactions can be made on and off without affecting the price of the entire market. The first and most widely traded digital asset in the world, Bitcoin, is frequently regarded as the most liquid virtual currency.

When determining which exchanges allow deals between fiat and cryptocurrency to be executed swiftly and without price slippage, liquidity can also be taken into consideration. The amount of liquidity will frequently rely on how many people are there on that certain platform.

Liquidity will reduce the capacity to charge a discounted or premium price in a perfectly competitive market. This is since active trading in cryptocurrencies or asset classes helps prevent price distortions.

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