I’ve been getting into finance, stonks and crypto lately and I love researching and learning. But one word I’ve never fully understood is “liquidity”.
What is it?
Does it mean cash?
Does it mean a bunch of stocks?
Is it a noun, an adjective?
What does it mean to provide liquidity?
What does it mean to liquidate?
What does it mean to be solvent/insolvent?
I’ve looked on many different articles and sources and I still can’t find a way of thinking about it that makes sense in all uses of the word
In: 7
It measures or describes how easy it is to turn something into cash. A house is an illiquid asset, for example, because it takes a lot of effort and time to sell the property and get cash for it.
Stocks are generally very liquid assets because you can sell them nearly instantly with the push of a button. You can compare the liquidity of different stocks and options and other financial instruments. Stocks with very low volume may not be as liquid as stocks with a lot of volume.
Latest Answers