Liquidity

A liquid market absorbs large orders with little price impact because there's plenty of depth on both sides of the book at nearby prices. An illiquid market has thin order books, so even modest orders can push the price around.

For example, a $5,000 market order on a deep, liquid book might move the price by about 0.02%, while the same $5,000 order on a thin book might move it by 2% — a hundred times more price impact for an identical order size.

A common mistake is assuming a large market cap automatically means high liquidity. Market cap measures total theoretical value; liquidity measures how much of that value can actually be traded right now without moving the price — the two aren't the same thing.