Exchange Rate Distortion

Definition ∞ Exchange rate distortion describes a situation where the perceived or reported value of an asset’s conversion rate differs significantly from its true market value. This discrepancy can arise from illiquidity, market manipulation, or technical glitches on trading platforms. Such distortions can lead to incorrect pricing, arbitrage opportunities, or financial losses for participants. It reflects an inefficient or manipulated market condition.
Context ∞ In cryptocurrency markets, exchange rate distortion is a frequent subject of news and analysis due to the volatility and fragmentation of trading venues. Reports often highlight instances where pricing discrepancies between exchanges lead to significant market events or exploits. The ongoing challenge involves ensuring accurate price discovery across diverse platforms and mitigating the impact of low liquidity on asset valuations.