Liquidity describes how much activity a market can absorb before the price moves materially. In digital asset markets, liquidity can vary significantly by asset, venue, time of day, and prevailing market conditions.

A narrow spread can indicate that buyers and sellers are close together, but spread alone is not enough. Depth, order size, volatility, and the speed of price changes all influence the quality of an execution.

Questions to ask before a trade

• Is there enough visible depth for the intended order size?
• How quickly is the price changing while the order is being considered?
• What fees, spread, and potential slippage affect the expected result?

Good execution is contextual. Reviewing liquidity alongside price movement helps turn a market quote into a more complete decision.