Liquidity Depth Measurement

Liquidity Depth Measurement is the evaluation of the volume of buy and sell orders available at various price levels around the current market price. It provides a visual and numerical representation of how much an asset can be bought or sold before the price moves significantly.

In crypto, this is often analyzed by looking at the cumulative order book volume at specific percentages away from the mid-price. A deep market has large order volumes at many price levels, making it resilient to large trades.

Conversely, a shallow market has little depth, leading to high volatility even with small trade sizes. Traders use depth measurements to assess the feasibility of large entries or exits and to identify potential price support or resistance levels.