Quote from: BaseFEX on November 26, 2019, 04:28:12 AM

Quote from: DimitrisLodirogas on November 25, 2019, 08:24:35 AM

Quote from: gentlemand on November 15, 2019, 02:42:38 PM

Liquidity = the ease at which you can turn an asset into cash.

A market with deep liquidity can absorb large buys or sells without moving much. A market with very little will fall apart at the first sign of one person's big move. Plenty of markets effectively have none.

It's all well and good having an impressive headline price for an alt, but when you look at an exchange and the buys waiting it might only take a sell of $100 worth to reduce the price by 50%. A liquid market will have enough buys to swallow that sell without budging.

Helped a lot. Thank you for the explanation. No wonder CMC+s main indicator won't be trade volume but liquidity.

Indeed, many used to hold the strong belief that trading volume is a good measure of liquidity. However, in recent years, more and more studies have shown that high trading volume does not necessarily imply high liquidity. This is true, especially from our perspective, since some exchanges have been known to directly or indirectly engage in a form of market manipulation called wash trading, in order to give unsuspecting traders the illusion of liquidity.

Generally speaking, liquidity is how easily an asset or security can be bought or sold in the market, and converted to cash. From the cryptocurrency exchange and its traders' perspective, there are three common measures on market liquidity:

The most popular and crudest measure of liquidity is the bid-ask spread, which is also called width. A low or narrow bid-ask spread is said to be tight and tends to reflect a more liquid market on the exchange.
The second measure is depth, which refers to the ability of the market to absorb the sale or exit of a position. If it takes a huge amount of capital to crash the cryptocurrency price in a top 5 market by a small percentage, the exchange is considered to have excellent liquidity.
Finally, the last measure--resiliency refers to the market's ability to bounce back from temporarily incorrect prices. If an exchange often exhibit lasting bizarre market prices for major trading pairs, it is a very convincing indicator of poor liquidity.

Thank you for explaining thoroughly and clear. Like the CMC stated liquidity is a better indicator than trade volume. Good trading day!