Liquidity pool refers to a collection of assets or capital that is made available to facilitate trading and ensure market liquidity.
It is typically provided by financial institutions, market makers, or investors who supply assets or funds so that buyers and sellers can execute transactions efficiently without large price fluctuations.
Liquidity pools help reduce spreads, improve price stability, and ensure continuous market activity – especially in less liquid or high-volume markets.
Example:
Market makers supply capital to ensure continuous trading activity.
