Learning the friendly way

L’ENS, c’est quoi exactement ?

L’Ethereum Name Service (ENS) est un système de nommage décentralisé conçu pour rendre les interactions sur Ethereum plus intuitives. Il permet aux utilisateurs de remplacer les longues adresses alphanumériques par des noms lisibles comme monnom.eth, facilitant ainsi les envois et réceptions de fonds.

Imaginez : au lieu de copier-coller une adresse complexe, il suffit d’écrire lea.eth pour envoyer des cryptos à cette personne. L’ENS fonctionne un peu comme le DNS sur internet, mais pour les adresses Ethereum.

Comment ça fonctionne ?

ENS repose sur deux composants principaux :

Le registre ENS

C’est ici que sont enregistrés tous les noms .eth. Lorsqu’un utilisateur enregistre un nom via une interface comme le ENS Manager, celui-ci est ajouté au registre et devient sa propriété.

Le résolveur ENS

C’est un smart contract qui associe un nom ENS à une adresse Ethereum. Il joue le rôle de traducteur : lorsqu’on saisit monnom.eth, le résolveur retrouve l’adresse Ethereum correspondante et permet l’envoi de fonds.

Les utilisateurs peuvent également ajouter des données supplémentaires, comme un lien IPFS ou un hash Swarm, ce qui permet d’associer des contenus décentralisés à leur domaine ENS.

Qui a créé l’ENS ?

L’ENS a été imaginé en 2016 par Nick Johnson, un ancien ingénieur de Google ayant rejoint la Fondation Ethereum. Le système a officiellement vu le jour en mai 2017 sous la forme d’un service autonome sur la blockchain Ethereum. Depuis, il est devenu un outil central dans l’écosystème Ethereum.

À quoi sert l’ENS dans la pratique ?

L'ENS facilite la vie des utilisateurs en simplifiant les paiements, les interactions avec les dapps et l’accès à du contenu décentralisé. Voici quelques cas concrets :

• Envoyer des cryptos à une adresse lisible (tonpseudo.eth) au lieu d’une suite de chiffres et de lettres.
• Héberger un site Web décentralisé via un lien IPFS rattaché à un nom ENS.
• Créer des sous-domaines (nft.tonnom.eth, pro.tonnom.eth) pour organiser ses services Web3.

Le token ENS, à quoi sert-il ?

En 2021, ENS a lancé son propre token de gouvernance, le ENS, permettant à sa communauté de participer aux décisions. Il ne sert pas à payer l’enregistrement de noms, qui se fait en ETH, mais uniquement à voter sur les propositions.

Voici un aperçu des prix (en ETH) pour enregistrer un domaine ENS .eth :

• 5 $/an pour un nom de 5 caractères ou plus
• 160 $/an pour un nom de 4 caractères
• 640 $/an pour un nom de 3 caractères

Ces tarifs reflètent la rareté des noms plus courts.

Qu’est-ce que l’ENS DAO ?

L’ENS DAO est une organisation autonome décentralisée qui gère l’évolution du protocole. Les détenteurs du token ENS peuvent :

• Proposer et voter des mises à jour ou des changements de politique
• Influencer les décisions stratégiques du projet
• Participer à la gouvernance d’un projet Web3 phare

Et la Fondation ENS ?

La Fondation ENS est une structure à but non lucratif chargée de soutenir l’adoption et le développement du projet. Elle organise des événements communautaires, distribue des subventions aux développeurs, et accompagne la croissance de l’écosystème en parallèle de l’ENS DAO.

Comment acheter des tokens ENS ?

Vous pouvez acheter, vendre et stocker des tokens ENS directement dans l’app Tap :

• Échangez vos cryptos ou devises contre des ENS
• Achetez du ENS avec votre carte Visa ou Mastercard
• Stockez vos ENS dans un portefeuille sécurisé intégré

L’app Tap offre une expérience fluide pour gérer vos actifs numériques, que ce soit pour explorer l’univers ENS ou d’autres projets Web3.

Le phénomène memecoin, kesako

Dans l'univers coloré et souvent chaotique des cryptos, il existe un coin particulier dominé par ce qu'on appelle les "memecoins". Contrairement aux cryptos classiques qui se prennent au sérieux avec leur technologie sophistiquée, les memecoins jouent une tout autre partition. Pas de grands discours sur la révolution financière ici - ces cryptos surfent plutôt sur la vague du fun et de la culture web.

Malgré leur côté amusant, les memecoins sont souvent au cœur de manipulations de marché et d'autres arnaques, ce qui en fait de véritables montagnes russes. Leur volatilité est extrême, et les risques sont bien réels.

Alors, qu'est-ce qui attire tant de monde vers ces blagues numériques ? C'est simple : certains memecoins ont parfois offert des rendements astronomiques aux plus téméraires. Mais dans cette galaxie de memecoins, comment distinguer les vraies pépites des arnaques ? Voici quelques repères essentiels.

Qu'est-ce qui rend les memecoins si populaires ?

Les memecoins, comme le célèbre Dogecoin ou Shiba Inu, démarrent souvent comme des blagues. Ils sont davantage associés au divertissement qu'à l'utilité, et gagnent en popularité grâce à la force de leur communauté, aux réseaux sociaux et parfois aux soutiens de célébrités.

Contrairement aux cryptomonnaies traditionnelles comme Bitcoin ou Ethereum, les memecoins ne reposent généralement pas sur une technologie complexe ou des cas d'usage spécifiques. Leur objectif n'est pas de résoudre de grands défis technologiques mais plutôt de capturer l'esprit d'Internet sous forme de jetons. Leur valeur est donc principalement portée par l'enthousiasme collectif, le buzz en ligne et l'excitation de participer à un mouvement viral.

‍Les revers de la popularité

Récemment, les memecoins font beaucoup parler d'eux, suscitant une vague d'enthousiasme — et malheureusement, une recrudescence des arnaques. Pour naviguer dans ce secteur particulier du marché crypto, il faut avoir l'œil affûté. Avant de se lancer dans un memecoin, il est crucial d'examiner le projet, l'équipe qui le développe, sa feuille de route et sa transparence globale.

Les bons réflexes pour éviter les arnaques

Au-delà des blagues et du buzz

Si l'attrait initial d'un memecoin vient souvent de son humour, sa pérennité nécessite plus de substance. Recherchez des memecoins qui offrent une véritable utilité et un rôle dans un écosystème plus large — ce sont des signes d'un projet qui potentiellement peut durer.

La transparence avant tout

Méfiance quand tout est flou! Méfiez-vous des memecoins entourés de mystère, où les informations sur l'équipe et leurs mises à jour sont rares. Un projet de memecoin fiable communique ouvertement sur ses avancées et sur les personnes qui le dirigent.

La sécurité, c'est du sérieux

Les memecoins attirant souvent l'attention des pirates informatiques, une sécurité robuste est indispensable. Un memecoin crédible aura fait l'objet d'audits de sécurité rigoureux. L'absence de mesures de sécurité solides est un signal d'alarme.

Une communauté qui assure

Une communauté dynamique et active est cruciale pour le succès d'un memecoin. Les projets portés par leurs communautés ont tendance à avoir un avenir plus prometteur, s'épanouissant grâce au soutien collectif de leurs membres.

Conclusion

Les memecoins représentent un phénomène unique dans l'univers des cryptomonnaies, mêlant l'humour d'Internet au monde des actifs numériques. Qu'on en rie ou qu'on les prenne au sérieux, ils sont devenus une partie fascinante de l'histoire des cryptos. Entre les succès éclair et les arnaques bien ficelées, difficile parfois de s'y retrouver.

Cependant, les caractéristiques mêmes qui rendent les memecoins attractifs — leur nature virale et l'engouement communautaire — en font aussi un terrain propice aux bulles spéculatives et aux déboires financiers. Ce marché peu ou pas régulé et souvent imprévisible attire à la fois les opportunités et les arnaqueurs.

Pour les curieux et les passionnés, naviguer dans cet univers demande de rester informé, vigilant et perspicace. Comprendre ce qui différencie un véritable memecoin d'une arnaque est crucial. Il ne s'agit pas uniquement du buzz initial ou de l'humour, mais de bien d'autres éléments comme de la valeur sous-jacente, des mesures de sécurité, de la transparence et de l'engagement communautaire qui soutiennent la pérennité du projet.

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While the crypto industry continues to grow at a breathtaking pace, one problem continues to run wild. That problem is the fact that blockchains are not interoperable, meaning that they can only exist in their individual nature. Polkadot set out to change this, creating a network that aims to connect multiple blockchains in one simple solution. As a direct competitor to Ethereum, the blockchain network has a different structural approach.

What Is Polkadot (DOT)?

Polkadot is a blockchain network created by one of the Ethereum founders. Through the use of intricate architecture, the platform aims to connect multiple networks through their relay chain and parachain system (more on this below). 

Similar to Ethereum, developers can create their own decentralized apps (dapps) and smart contracts on the network. Referred to as a sharding multichain network, Polkadot aims to provide a platform on which developers can build multiple blockchain networks off a common standard. Traders can then trade a range of products built on the network, similar to how ERC-20 tokens are traded.

Who Created Polkadot?

Founded in 2016, Polkadot was created by one of the Ethereum co-founders, Gavin Wood, alongside Peter Czaban and Robert Habermeier. Woods notably created the Ethereum language Solidity, which allows developers to create dapps on the Ethereum network. 

Wood is also the founder of Parity Technologies and the president of Web3 Foundation. Web3 Foundation is a Swiss foundation that was designed to facilitate a user-friendly, open-source decentralized web. The company's approach to crypto is one of its kind and sets it above any other competitor.

How Does Polkadot Work?

As mentioned above, Polkadot utilizes a relay chain and parachain system. Each parachain is a blockchain in itself, however, they all rely on the relay chain to facilitate transactions. These blockchains work in a "parallel" manner (hence the name) and can each hold their own tokens and individual use cases. The relay chain provides blockchain support to the parachains on the network.

Finalizing the transactions and being responsible for maintaining network security, the relay chain is able to facilitate 1,000 transactions per second (TPS). Utilizing a hybrid consensus mechanism, the enterprise network has created proof-of-stake (PoS) and a nominated-proof-of-stake (NPoS) model. 

Through this variation, anyone can stake DOT in a particular smart contract and perform network roles such as being a :

• Validators (validate data in parachain blocks, vote on network changes)
• Nominators (select validators by delegating their staked DOT to them)
• Collators (nodes with full histories of each parachain, that transfer this information into blocks for the relay chain)
• Fishermen (responsible for monitoring the network and reporting bad behaviour to the validators)

These four roles allow Polkadot to have a highly sophisticated user-driven governance system as each role contributes to maintaining and securing the network while eradicating bad behaviour. 

The network is working on a third blockchain functionality known as a bridge. Bridges will allow blockchains on the Polkadot network to interact with "outside" blockchains, essentially allowing tokens to be swapped directly without needing to go through an exchange. 

Through this intensive structuring, Polkadot aims to solve two problems that the blockchain network is currently plagued with scalability and governance. 

What Is DOT?

DOT is the native cryptocurrency to the Polkadot network and is used as a governance and utility token, allowing users to vote on proposed upgrades and used for gas fees. It plays an integral role in maintaining and operating the network. As a digital currency, it can also be used to execute cross-border transactions.

The platform was launched in 2020 and has already established itself in the top 10 biggest cryptocurrencies. 

Does Polkadot Have A Max Supply Cap?

To answer the question "what is the total supply of Polkadot" the answer is that there isn't one. The network opted to leave the total number of DOT infinite. At the time of writing the circulating supply was just short of 1 billion coins.

What Is The Difference Between Polkadot And Ethereum?

A common question in the crypto community, not just because they share similar use cases but also because the two networks share a founder. Both networks provide a platform on which developers can create their own blockchains, and following the launch of Ethereum 2.0., will both be using a PoS consensus. 

Structurally the Polkadot platform differs in that it makes use of parachains and a relay chain. This is a unique feat in the blockchain industry. Through this structure, the network aims to improve on several of Ethereum's functionalities and deliver a trifactor of governance, scalability and interoperability to the blockchain industry, without compromising security. 

How Can I Buy Polkadot?

If you're looking to incorporate Polkadot (DOT) in your cryptocurrency portfolio, look no further than Tap Global. A recent addition to the exchange's portfolio, users can buy, sell, trade and store DOT directly through the professional app. Whether looking to trade DOT for its technology and smart contract capabilities, or to tap into a new market, Tap allows traders to diversify their cryptocurrency portfolio in one secure location.

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In this article, we’re exploring the most recent addition to the list of supported cryptocurrencies on the Tap App, one of the highly esteemed top 20 cryptocurrencies based on market cap, Algorand (ALGO).

What is Algorand (ALGO)?

Algorand is a decentralized blockchain platform that supports the development of a wide range of dapps (decentralized applications). The platform has been used to create dapps across industries like real estate, copyright, microfinance and more. Launching the same month as its ICO, the Algorand mainnet officially went live in June 2019. 

The Pure-Proof-of-Stake (PPoS) network was created to improve efficiency and transaction times within the crypto space, as well as reduce transaction costs. With no mining (due to the PPoS consensus), Algorand represents a more sustainable and energy-reserving contribution to the space. 

A unique aspect of the platform is that as new ALGO enter circulation with the creation of each new block, the newly minted coins are distributed to everyone who holds a certain amount of ALGO in their wallets. 

While the project is relatively new, it has received the backing of big names and has seen impressive company interest. In June 2021, Arrington Capital bet $100 million on the platform after launching a fund supporting initiatives building on Algorand, while fintech infrastructure provider Six Clovers launched a cross-border payment system on the platform. 

The platform was also selected to host the Marshall Islands CBDC. 

Who created Algorand?

The blockchain platform was created by Silvio Micali, a highly regarded contributor to the crypto space and recipient of the 2012 Turing Award. The MIT computer science professor was recognised for his fundamental contributions to “the theory and practice of secure two-party computation, electronic cash, cryptocurrencies and blockchain protocols.” 

The Algorand whitepaper was co-authored by Stony Brook University professor Jing Chen.

When first conceptualised in 2017, Micali wanted to create a platform that not only provided digital transactions but also tracked assets like titles and property. The platform also allows for the creation of smart contracts (decentralized digital agreements) and tokens. 

How does Algorand work?

The Algorand platform is divided into two layers: layer 1, responsible for ​​ensuring the network’s security and compatibility, and layer 2, responsible for more complex developments. 

Layer 1 supports asset creation, smart contracts, and atomic swaps between assets while layer 2 is reserved for more compound smart contracts and dApp development. These two layers allow the network to process transactions more efficiently, with simple transactions taking place on layer 1, while more complex smart contracts are executed off-chain. 

Through the pure proof of work consensus, the two-phase block production is conducted through a propose and vote system where users who stake ALGO are randomly selected to validate and approve each block as it is created. Stakers only need to hold 1 ALGO in order to generate a participation key necessary to become a Participation Node. 

These nodes are coordinated by Relay Nodes which are not actively involved in the verification process but are responsible for facilitating communication among the Participation Nodes.

The more of the native cryptocurrency a user holds, the more likely they are to be selected. This consensus ensures that the platform is secure, decentralized and able to process transactions in seconds as opposed to minutes (as on other networks).

Algorand is able to process over 1,000 transactions per second (TPS) and validate transactions in less than five seconds.

What is ALGO?

ALGO is the native token to the Algorand platform. As the newly minted coins are distributed to all users holding ALGO (whether on an exchange or in a non-custodial wallet) and not just the nodes verifying transactions, holders of the token are able to earn a 7.5% annual percentage yield (APY). 

A total of 10 billion tokens were minted, with roughly 6.8 billion in circulation at the time of writing. These tokens are gradually entered into circulation through predetermined distribution channels. The token distribution for ALGO is as follows:

• 3.0 billion. To be injected into circulation over the first 5 years, at first via auction.
• 1.75 billion. Allocated to participation rewards.
• 2.5 billion. Allocated to relay node runners.
• 2.5 billion. Allocated to the Singapore-based Algorand Foundation & Algorand, Inc.
• 0.25 billion. Allocated to end-user grants. 

How Can I Buy ALGO?

If you’re interested in accumulating this leading blockchain token, you can do so effortlessly through the Tap app. As part of a new string of supported tokens, Tap users will now be able to buy, sell, trade and store the cryptocurrency that everyone is talking about. 

The world we are living in is constantly evolving, finding new ways to embrace technology and the impact it can have on our future. From struggling to get a man on the moon to billionaires casually flying up into space, we have come a long way from what was once only dreams.

One thing that has been on peoples' minds for a while is our integration into a more VR-compatible world. If you have seen the movie "Ready Player One" then you know what we are talking about. Although augmented reality and VR is not as inclusive as it could be yet, it offers an escape from our realities via the internet.

Buying a VR headset and visiting Japan would be much cheaper than plane tickets, accommodation, and money for food. This once-off price for VR has provided a new dream for many of us, and there are a few companies taking advantage of this demand in the market. 

The Metaverse Explained 

Although Metaverse is closely tied to Facebook, now called Meta, the term was first coined in the 1992 novel Snow Crash by author Neal Stephenson. The novel followed a dystopic future where people spend most of their time in a virtual reality metaverse. Why Facebook would base their project on a dystopian novel is a question we can't answer. Facebook isn't even the first company to embrace a "VR universe", we have seen game providers such as Epic Games host VR concerts on their platforms, such as the Travis Scott performance.

We have also seen games like Second Life become increasingly popular as social contact has become limited in past years due to the pandemic, providing a relatively safe virtual world for people to interact. While these platforms have come close, nothing compares to what the Metaverse has in store. 

"Meta" relates to the Greek origin for the word beyond, while "Verse" is associated with the word universe, meaning beyond universe. The core concept of this idea is to create a virtual reality world, giving us access to everything in our world and beyond. From buying to selling to gaming, to human interactions, and more. There is no limit to how far the Metaverse can go.

The Metaverse could provide a way for humans to experience more at a reduced price and easier access, whether that be school education or leisure activities. In its basic form, the Metaverse is a way for people to integrate into a virtual world and perform complex interactions.

What To Expect 

While Facebook, or Meta, has not definitively laid out their plans for the Metaverse and all the more intricate details, there are some things we can expect. So using some creative freedom, basic expectations, and what has been confirmed, these are 5 things you can expect from the Metaverse: 

Virtual reality: The most obvious feature we can expect from the Metaverse is that it will be based in a virtual reality world, or universe, accessible through VR-compatible devices. 

Workspaces: Another feature to expect is a workspace, whether it be to motivate people, or board rooms designed for teams to have talks, we are sure the Metaverse is making space for work. 

Events: We have already seen other platforms host virtual events, this is surely something we will see popping up in the Metaverse. Expect concerts, conferences, and more. 

Games: There has already been some confirmation of VR games entering the Metaverse, we may not be sure what games yet, but it would be a waste not to include a community already interested in VR gaming. 

Retail purchasing: The Metaverse is geared up and ready to take on retail, whether that be allowing people to buy things through the Metaverse for delivery, or to use on the Metaverse. We can expect VR clothing and merch to be a big feature. 

This is just the basics, we believe, with so much more to still be conceptualized and confirmed. The Metaverse, while exciting, holds more praise in its potential than its progress as of yet. Hopefully we will see more fun additions, maybe some VR Disney Worlds or skiing trips down Mount Everest, who knows? 

Things You Might Still Be Wondering About The Metaverse

Now that you know the basics of what a Metaverse is and what to expect from the Facebook Metaverse let delve into some other topics. These are the most frequently asked questions associated with the Metaverse:

Is Metaverse just VR?

Not necessarily, we have seen Metaverse-adjacent projects run their virtual worlds without the use of VR or VR headsets. In short, the Metaverse offered by Facebook is being launched as a Virtual Reality world, but that doesn't mean all will be. 

Do you need Occulas for Metaverse?

The device of choice, or choices, has not been announced as of yet. We expect the Facebook Metaverse to offer more than one option point for accessibility. 

Is Roblox a Metaverse?

At its core basics, yes, it is a virtual world with a variety of interaction options such as retail, socializing, and gaming. 

Who owns the Metaverse?

No one person owns the Metaverse, there are multiple companies working to launch their versions of a Metaverse. There is currently no patent on the term or concept yet, although we may see features patented in the future. 

Is Decentraland a Metaverse?

At its core basics, yes, it is a virtual world with a variety of interaction options such as retail, socializing, and gaming.  

Why is the Metaverse good?

We have highlighted some points, but let's break them down again. It is generally cheaper for some experiences, it is accessible to the world, it's another way for the world to connect, and it's an advancement of technology. There is more, but these are the main focal points. 

In Conclusion 

The Metaverse, whether that be Facebooks' version or another, is a very exciting thing. There are so many possibilities, and ways it can better the world. Virtual protests anyone can join, recovery programs or groups, being able to go to your favorite artist's concert without flying thousands of miles, and more.

The possibilities truly are endless, and we are privileged to be able to be a part of the building's progress. A virtual world, or universe, may have some risks associated with it, but we also see plenty of potential for good. The positives and negatives of the Metaverse are going to vary, from platform to platform, depending on what the company has in store.

While the Facebook Metaverse may be the most mainstream at the moment, there are and will be better Metaverses such as the Microsoft one rising soon enough. So stay tuned as the Metaverse is brought to reality.

When trading, market liquidity offers a measure of how quickly an asset can be converted to cash. The more market liquidity an asset has, the more easily it can be traded for cash. This comes into play when looking at its price point: the more tradable an asset, the less impact the trade will have on the asset's price. 

Other factors to look out for include trading volume, technical indicators, and volatility. Liquidity is important for everything across the stock market and digital asset market to a company's liquidity, with liquid assets always being preferable. Let's first take a look at what liquidity is, the most liquid assets and the key takeaways liquidity refers to.

What does liquidity mean, exactly?

In its simplest form, liquidity looks at how easily and quickly an asset can be converted to another asset (bought or sold) without affecting its price. Liquidity can also sometimes be referred to as a cash ratio or marketable securities. A liquidity ratio helps investors determine whether something is a liquid asset or not and how easy it will be to convert assets.

When an asset has good market liquidity, this means that it can easily be traded for cash or other assets with no effect on the asset's market price. Referred to as liquid assets, these would include currencies, marketable securities, and money market instruments. This provides peace of mind to investors that have other financial obligations.

On the other hand, low liquidity means that the asset cannot be as easily bought or sold and any transaction that takes place will affect the asset's trading price. Real estate, rare items, and exotic cars present examples of illiquid assets, meaning that they may take longer to be sold, and not necessarily at the price the seller is expecting to receive. 

What is the most liquid asset?

In terms of financial liquidity, cash is considered to be the most liquid asset.

Think of liquidity as a spectrum - on the one hand, you have cash (highly liquid) and on the other, you have rare items. Consider where on the spectrum an asset might fall to get an idea of its liquidity. 

Types of liquidity

In a general sense, there are two types of liquidity: market liquidity and accounting liquidity used to measure the current ratio of an asset or company.

What is market liquidity?

The first of the two types of liquidity is market liquidity, defined as the ease with which a financial asset may be bought and sold at fair prices. These are the prices that are most similar to the assets' actual value, known as their intrinsic value. 

Intrinsic value in this case refers to the lowest price a seller is willing to accept (ask) and the highest price a buyer is willing to pay for it (bid). The bid-ask spread, also known as the trading spread, is the difference between these two values. The lower the bid-ask, the greater the liquid asset.

What is accounting liquidity?

Accounting liquidity describes a company's ability to pay its short-term debts and liabilities with its current assets and cash flow. In other words, it reflects the company's financial health: the higher the company's accounting liquidity the more liquid the company's capital.

Most commonly, you'll hear accounting liquidity mentioned in relation to businesses and their balance sheet. This has less to do with liquid assets and more to do with businesses, and the company's financial health, as a whole.

What is a bid-ask spread?

The bid-ask spread refers to the difference between the highest bid and the lowest ask price. As you would expect, a low bid-ask spread is preferred in liquid marketplaces. It implies that the market has sufficient liquidity since traders continuously bring the high and low prices back into balance.

A wide bid-ask spread, on the other hand, generally indicates illiquidity in an asset and a substantial gap between what buyers are willing to pay and what sellers are willing to accept. 

The bid-ask spread plays a valuable role for arbitrage traders as they attempt to take advantage of minor disparities in the bid-ask spread over and over again.

While they make money, their activities help to support the market as they reduce the bid-ask spread, and other traders will have better trade execution as a result of their activity.

Arbitrage traders also make sure that the same market pairs do not have significant price disparities on various exchanges. Have you ever seen how the Bitcoin price is roughly similar across the most liquid markets? This is due in large part to arbitrage traders who exploit small variances between prices on different exchanges to profit.

Why liquidity plays an important role in the markets

Bigger stocks and digital currencies tend to have more liquid markets due to their higher trading volume and market efficiency. 

The amount of money traded per day, otherwise known as liquidity, varies depending on the market. For example, some markets may only have a few thousand dollars of trading volume while others have billions.

Assets from large companies or establishments don't usually have issues with liquidity since there are many buyers and sellers in their respective markets. However, this isn't the case for less traded assets which often lack significant liquidity.

When building your portfolio ensure that you incorporate (or stick to) liquid markets so that you can always know that should you wish to liquidate the asset you will get a good price. Sometimes with smaller assets, you might not be able to exit the market at your desired price leaving you with an invaluable asset or one traded at a significantly lower price.

This is known as slippage and can result from trying to fill a large order in an illiquid market. Slippage is the difference between the price you intended to sell at and at what price your trade is actually executed. 

High slippage indicates that your transaction was completed at a significantly different price than you intended. This usually occurs because there aren't enough orders in the order book near to where you wanted to execute them. This can be avoided by only using limit orders, but this runs the risk that your order may not be filled.

The market conditions significantly affect liquidity. For example, in a financial crisis, different traders might respond by either selling their assets or withdrawing cash.

Final thoughts

When it comes to the markets, liquidity refers to the ease of trading in a market. Traders often favor liquid markets because they provide convenient access for entering and exiting positions. The level of liquidity can influence the efficiency and effectiveness of trading strategies. Depending on your preferences, you might consider including highly liquid assets in your portfolio, which can have benefits in terms of flexibility.

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