Stablecoin liquidity is the ease with which a stablecoin can be bought, sold, or converted at or near its reference value in the required size and time frame.
Liquidity can arise at several points in a stablecoin arrangement. Secondary-market liquidity concerns trading depth and price impact. Redemption liquidity concerns access to conversion through the issuer or protocol. Reserve-asset liquidity concerns the issuer's capacity to convert backing assets into the assets needed for redemption. These conditions can diverge during stress. A stablecoin can trade in deep secondary markets while direct redemption remains narrow, or an issuer can hold liquid reserves while a specific trading venue becomes illiquid.
Market liquidity, redemption liquidity, and reserve-asset liquidity refer to different parts of the same arrangement. StablecoinBeat should identify the relevant layer when using liquidity as an analytical variable.
Liquidity affects arbitrage around the peg and the capacity of issuers, intermediaries, and markets to process large flows during stress.
A stablecoin can have deep exchange order books while retail holders still depend on intermediaries because they lack direct access to issuer redemption.