Capital and Liquidity

Definition ∞ Capital refers to the financial resources available for investment, while liquidity denotes the ease of converting assets into cash. In digital asset markets, capital represents the funds allocated by individuals or institutions for cryptocurrency holdings and operations. Liquidity indicates how quickly a digital asset can be bought or sold without significantly affecting its price. High liquidity is vital for efficient market function and reduced trading friction.
Context ∞ The availability of substantial capital and deep liquidity pools is critical for the stability and maturation of digital asset markets. Regulators closely examine these factors to assess market robustness and potential systemic risks. News often covers initiatives aimed at increasing institutional capital allocation and enhancing liquidity across various crypto exchanges and decentralized platforms.