A liquidity gap describes a situation in financial markets where there is a significant disparity between the available assets that can be readily converted to cash and the immediate cash obligations. In cryptocurrency markets, this refers to periods where there are insufficient buyers or sellers to facilitate large transactions without causing substantial price movements. It signifies a lack of market depth.
Context
The presence of a liquidity gap is a critical concern for market participants and often appears in analyses of market stability and trading conditions. Such gaps can exacerbate price volatility during periods of high demand or supply. Understanding liquidity gaps is important for assessing market risk and the operational efficiency of various digital asset exchanges.
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