What does liquidity mean for crypto trading?

Within the cryptocurrency market, we can think of liquidity across three levels: asset liquidity, exchange liquidity and market liquidity.

Asset liquidity is a function of the buyers and sellers for a specific asset, as well as its ease of access on exchanges; exchange liquidity is a function of the makers and takers on the platform, as well as the asset pairs listed; and market liquidity is a function of all those pieces put together to constitute the health of the crypto markets.

Traders in these markets need to have all three levels in mind, but particularly asset liquidity and exchange liquidity, as each trade requires a decision based on, and direct interaction with, both of these. While most investors are considering fundamentals and technical analysis, there should also be a careful consideration of buy and sell strategies related to the liquidity of an asset and where to execute those transactions, particularly for frequent traders.