What is liquidity in crypto?

Liquidity is the ability to buy or sell an asset reasonably quickly without moving its price substantially. In crypto markets, available orders or assets offered through a pool determine how much trading the market can absorb. Coinbase’s definition connects ease of trading with price impact.

A token can have deep trading on one exchange and sparse orders on another. Liquidity can also differ between pairs and change during the day. Reported volume measures completed trades over a period; it does not establish the price available for your next order.

Example: selling 100 tokens

Suppose an order book has buyers for 20 tokens at $10 and another 80 at $9.80. If those orders remain available, a market sale of 100 tokens receives $200 + $784 = $984 before fees. The average is $9.84 per token. The best bid of $10 was available for only part of the order, not the entire sale.

The example illustrates order size relative to depth. In a pool, the related concept of price impact describes the trade’s effect on pricing. Even a narrow bid-ask spread can sit above very small quantities.

A liquidity pool is one way of supplying liquidity, not a synonym for liquidity itself. Our DEX swap guide explains how to read price impact and minimum output before signing a swap.