Importance of liquidity

Market liquidity refers to the ease and speed with which an asset can be bought or sold without significantly affecting its market value. While liquidity is not synonymous with cash, it does represent the available funds for trading a particular asset. Within the realm of decentralized finance (DeFi), a trading pool is considered liquid if it can accommodate substantial orders without causing a notable price change. Liquidity on a decentralized exchange (DEX) typically originates from three primary sources:

1. Pool creators. These are teams responsible for launching a token who must supply adequate funds, including the token itself and its corresponding cryptocurrency like USDT, to initiate trading.

2. Market makers and liquidity providers. These are professional users who offer liquidity in both buying and selling directions for a fee. They often collaborate with larger projects to ensure ample liquidity.

3. Everyday liquidity providers. These are users like yourself who contribute funds to a pool and maintain them there for an extended period, thus supporting market stability. QuantoSwap, for instance, attracts long-term liquidity through its innovative staking pool and referral system.

It is crucial to note that liquidity outweighs price in importance. In illiquid pools, a single transaction can cause significant price swings of 10% or more, making such assets susceptible to manipulation. Therefore, caution is advised when trading in such conditions.

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