What is liquidity? The role of liquidity when choosing a cryptocurrency exchange

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To measure the health of the market or a particular coin, you can look at volume, volatility, or technical indicators that measure momentum. However, there is an extremely important factor that you cannot ignore, which is liquidity.

What is Liquidity?

Liquidity refers to how easy it is to buy or sell a certain asset without (or with little effect) the price of that asset. Assets are considered highly liquid when they can be sold quickly without waiting for a transaction to match and without slipping in price. 

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Gold is a prime real-life example of a highly liquid asset. Gold can be easily bought, sold and exchanged anywhere due to its rarity and preciousness. Therefore, the acceptability of buyers and sellers is very high. 

In crypto trading, liquidity plays a very important role because liquidity has a huge influence on the price, resulting in the difference between the expected profit and the actual return of that cryptocurrency. Therefore, investors should learn about some high-liquidity exchanges like Binance and Bybit or choose good coins with large trading volumes like BTC, ETH or stable coins like USDT.

The importance of liquidity

Liquidity is always a very important factor that investors should consider carefully when investing in any market. High liquidity in the market is an ideal scenario to ensure that investors' orders do not slip due to the large number of buyers and sellers.

The market has high liquidity, the price will not change too strongly and is not easily influenced by large transactions. It is very difficult for "sharks" to manipulate prices because compared to the total volume of the whole market, it is nothing. Thanks to that, the market will be stable and reduce risks for investors.

Also, liquidity is a measure of the number of current buying and selling participants in the market. So it is easy to understand that high liquidity is always accompanied by high trading volume and high order matching speed. Basically, this means that you can enter or exit a trade at any time because there are always market participants available to trade with you. This is sometimes important in fast-moving and second-to-second market conditions like cryptocurrencies.

Finally, liquidity also affects the accuracy of price patterns in technical analysis. Technical analysis deals with the history and past movements of prices, and it greatly influences an investor's strategy and method before making a decision. High liquidity allows for more accurate technical analysis as price and chart formation will be more developed and accurate.

Which exchange has the best liquidity?

Currently, in the crypto market there are many exchanges and trading platforms operating but not all exchanges have high liquidity. Large trading volume is one of the obstacles to the liquidity provision of some exchanges. You can check the exchange's trading volume on websites that provide statistics like Coinmarketcap, Coingecko or Tradingview, ..) or directly on the exchange. Some exchanges with large trading volume include Binance, Bybit, OKX or BingX.

You can check the trading volume right on the exchange

According to statistics from coinglass, Bybit and Binance are the two most liquid cryptocurrency exchanges in the market today and far ahead of the rest, especially the two pairs. BTC-USDT , and ETH-USDT. Exchanges with a large trading volume, with many participants will help promote liquidity and you should prioritize choosing this exchange.

(Source: Coinglass)

Liquidity plays an important role, and contributes to deciding whether your investment in buying and selling coins is effective. The crypto market is not always completely safe, but liquidity is still an important factor when you enter any market. Therefore, when deciding to invest, liquidity needs to be considered first.

About Bybit

Bybit is a cryptocurrency exchange founded in March 3, providing a professional platform where crypto traders can find an extremely fast execution engine, customer service great and multilingual community support.

Bybit provides groundbreaking spot and derivatives trading services, mining and staking products, NFT marketplace and API support to retail traders and institutional customers around the world, and is committed to strives to become the most trusted platform in the emerging virtual asset segment.

Bybit is proud to be a partner of the Formula 1 (F1) racing team, Oracle Red Bull Racing, eSports teams NAVI, Astralis, Alliance, Virtus.pro and Oracle Red Bull Racing Esports, and the football teams of association Borussia Dortmund and Avispa Fukuoka.

For more details, please visit: https://www.bybit.com/

For updates, please follow Bybit's social media platforms on:

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