Market depth and liquidity significantly influence price volatility. Market depth, the volume of buy and sell orders at various price levels, reflects a market’s ability to absorb large trades without drastic price shifts. High depth typically stabilizes prices, as substantial orders can be executed with minimal impact. Liquidity, the ease of trading an asset without affecting its price, complements this. In highly liquid markets, price changes are smoother due to frequent trading and tight bid-ask spreads, reducing volatility. Conversely, low depth and liquidity amplify price swings, as even small orders can trigger outsized reactions. Thin order books or illiquid conditions often lead to sharp spikes or drops, especially during high uncertainty. Thus, robust market depth and liquidity act as buffers, dampening volatility and fostering price stability.