In this paper, we develop an equilibrium model for market liquidity and its impact on asset prices when constant participation in the market is costly. We show that, even when agents' trading needs are perfectly matched, costly participation prevents them from synchronizing their trades, which gives rise to the need for liquidity. Moreover, the endogenous liquidity need, when it occurs, can lead to market crashes in absence of any aggregate shock. We also show that the lack of coordination among agents in the demand and the supply of liquidity generates negative externalities, and the loss in social welfare can out-weigh the savings on participation costs.