Liquidity refers to the ease of cash flow, where assets can be bought or sold without taking an incurring hit on the asset value. Bitcoin (BTC) is the most traded cryptocurrency in the world, making it one of the most liquid cryptocurrencies in the world.
Liquidity can also be termed as a metric used to determine the ease of exchange from crypto to fiat currency. In a liquid market, this exchange occurs almost instantaneously without affecting the price.
Based on the level of liquidity, one can also determine the number of users actively participating in the said platform. With a further adaptation of cryptocurrency, the liquidity within the market is going to increase over time.