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Trading Pairs Liquidity Correlation Meaning

Trading pairs liquidity correlation refers to the relationship between liquidity conditions across different trading pairs, particularly those sharing a common base or quote asset. When liquidity in one pair changes, it can influence spreads, depth, and execution quality in related pairs.

In crypto markets, liquidity correlation is often observed among pairs quoted against major assets such as BTC, ETH, or stablecoins. A liquidity shock in a primary pair may cascade into secondary markets through arbitrage and rebalancing activity.

Understanding liquidity correlation helps traders and market makers anticipate spillover effects and manage cross-pair risk more effectively.

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