Definition ∞ Spot market liquidity refers to the ease with which a digital asset can be bought or sold immediately at its current market price without significantly affecting that price. It is determined by the volume of trading activity and the depth of the order book on spot exchanges. High liquidity indicates numerous buyers and sellers, allowing for large transactions with minimal price slippage. This characteristic is crucial for efficient price discovery and reduces execution risk for traders.
Context ∞ Spot market liquidity is a fundamental metric for assessing the health and efficiency of a digital asset market, frequently highlighted in crypto news. Low liquidity can lead to increased volatility and make large trades difficult to execute without substantial price impact. Regulatory scrutiny often focuses on liquidity metrics, as they relate to market manipulation risks and investor protection. Enhancements in liquidity, often driven by increased institutional participation, are generally viewed as positive market developments.
Blockchain Knowledge
Cryptocurrency Foundation
Cryptospace Newsfeed
