What does liquidity mean in crypto?

Liquidity in cryptocurrency markets essentially refers to the ease with which tokens can be swapped to other tokens (or to government issued fiat currencies). One way a market achieves liquidity is through the use of order books, like in a stock market.

A liquidity pool can be thought of as a pot of cryptocurrency assets locked within a smart contract, which can be used for exchanges, loans and other applications . In traditional finance (Centralised Finance or CeFi), liquidity is provided by a central organisation, such as a bank or a stock exchange.16 Ara 2021

A liquidity pool is a crowdsourced pool of cryptocurrencies or tokens locked in a smart contract that is used to facilitate trades between the assets on a decentralized exchange (DEX) .