Liquidity Risks and Market Depth: A cryptocurrency’s liquidity is crucial for reducing volatility and enabling smooth trading. Low liquidity can increase slippage and exacerbate price volatility. Investors should evaluate the liquidity and market depth of an asset before investing. Choosing projects with sufficient liquidity or liquidity partnerships, such as listings on major exchanges, can mitigate these risks. Active market makers or liquidity providers can further reduce risks by ensuring stable asset trading.