A term used in corporate finance to describe the ease with which assets can be converted to cash without affecting market prices.
Liquidity is simply the ease of exchanging assets for cash in such a way that the market price of these assets are not affected. Ideally, the liquidation process involves the selling of the assets to other buyers, once again, without causing fluctuations in market prices. Thus, market liquidation refers to a market’s security against price fluctuations in the event that a specific fraction of assets must be sold off.
Liquidity is a paramount characteristic of both fiat and crypto exchanges. It is essentially the ease with which a trader or investor can get out of the trading market without getting any less than their available balance.