The liquidity term is mostly seen in our stock markets to present how easy the process is of converting an asset into physical cash without any difficulties. In the crypto sphere, the term liquidity means the ability to convert the crypto coins into physical cash or other coins in a simple and easy way.
In the Decentralized Finance (DeFi) the liquidity plays a huge role and it’s the key factor because if the liquidity is low the market will embrace volatility and it will cause spikes in the coins price which is not good for the investors and it can have a huge drawback. On the other hand, high liquidity is the key factor in providing a secure and stable market with a few fluctuations in the crypto prices. This will allow the buy and sell order to be more fast and quickly filled thanks to the enormous number of market contributors. With the high liquidity the crypto traders can buy or sell their orders at any moment without losing value on their trade.
Why is Liquidity most important key factor?
High liquidity attracts a huge number of investors, especially day traders that can earn profit by doing swing trades or short time investments without worrying about losing value over their funds due to low liquidity. Another thing is that with liquidity, users will be able to read the chart and do technical analysis for where the price will go on a short period of time, with the low liquidity this is not possible and it is very risky.
What are the factors that are affecting the Liquidity?
The biggest factor in the liquidity is the market volume. A market that has huge volumes can have a solid and stable price flow. Other factor that can affect the liquidity is the usability. The more users and companies accept the crypto coins as a medium of exchange the better for the liquidity, merchants accepting crypto can be a game changing towards the decentralized finance space. Another factor that can play a very important role is the regulations, while some countries are banning the crypto technology other countries are welcoming it and regulate it, this helps the market to become more steady and more secure which increases the liquidity.
Is there an easier way to proceed?
With the EGG token, you don’t have to bother anymore on finding most profitable liquidity pools, and having to use 2 coins to start.
EGG uses smart contracts to automatically be swapped into the 2 tokens of your selected pairs and add liquidity on your behalf. It also boosts your yield as you get your transaction fees on the decentralized exchange + EGG tokens too as an extra reward.
What is your favorite crypto liquidity mining pair, leave a comment below!
Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of EGG Finance. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.