Definition of liquidity
If you want to sell a certain crypto coin for fiat or a stablecoin and have your transaction not move the price, you need liquidity. In other words, liquidity is the degree to which a coin (or other asset) can be traded in the market at a price that is reflecting its current value. If you make a market order and you move the price of the coin significantly then there is little liquidity. The most liquid coin in crypto is Bitcoin with 25 – 30 billion of trading volume a day on average.
Examples of liquidity in a sentence
“I have a big bag of a token that I want to sell but I can’t get a good price because there is too little liquidity.”
“I prefer trading on Bitcoin because that is always liquid so I will never get stuck in a position.”
More info on liquidity
When you are an active trader you want to be aware of liquidity on the coin, token or asset that you are trading but also of the exchange or broker you are trading at. You want to trade something that has a high liquidity so you know that you will always be able to enter or exit a position. But liquidity on say Bitcoin is not the same on each exchange. Binance for example generally has over 1 billion of trading volume a day on the BTC/USDT pair while the Bittrex exchange only has around 2 million of trading volume in a day.