Definition ∞ Liquidity challenges in digital asset markets describe situations where it is difficult to buy or sell a significant amount of an asset without substantially impacting its price. This condition indicates insufficient trading volume or a limited number of active market participants. Such challenges can hinder efficient price discovery and increase transaction costs for investors. They often become pronounced during periods of high market volatility or low confidence.
Context ∞ News reports frequently address liquidity challenges in smaller altcoin markets or during periods of market stress, such as sudden price drops. Solutions often involve the introduction of market-making incentives or improvements in exchange infrastructure. Addressing these challenges is vital for fostering market stability and encouraging broader participation.
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