Definition ∞ An illiquid asset is a digital asset that cannot be quickly converted into cash or other assets without a significant loss in value. This characteristic arises from a lack of willing buyers or sellers in the market, or from market conditions that restrict trading volume. Examples in the crypto space include certain niche NFTs, newly launched tokens with limited trading pairs, or large block holdings that would crash the market if sold all at once. Illiquidity poses a risk to investors who may need to exit their positions promptly.
Context ∞ The discussion around illiquid assets in crypto news often relates to market stability, particularly during periods of high volatility or stress. The current situation involves concerns about the valuation and risk management of less frequently traded digital assets held by institutional investors and protocols. A critical future development is the creation of more robust secondary markets and improved pricing mechanisms for these specialized digital assets.
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