Definition ∞ Onchain Liquidity Metrics are quantitative measures derived directly from blockchain data that assess the ease and efficiency with which digital assets can be traded on decentralized platforms. These metrics include the depth of liquidity pools in decentralized exchanges (DEXs), the volume of assets available for lending and borrowing in DeFi protocols, and the overall transaction flow on the network. They provide a transparent view of available capital and trading activity. These measurements are crucial for understanding market depth.
Context ∞ News reports often analyze onchain liquidity metrics to gauge the health and efficiency of decentralized finance (DeFi) markets. A decline in these metrics might signal reduced confidence in certain protocols or a general withdrawal of capital from DeFi. Conversely, increasing onchain liquidity suggests growing participation and a more robust decentralized trading environment. These metrics are vital for assessing the functional capacity of blockchain-based financial systems.
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