Definition ∞ A liquidity stress signal refers to any indicator suggesting a potential or actual shortage of readily available assets for trading or settlement within a market. This signal can manifest as widening bid-ask spreads, increased transaction slippage, or a sudden decrease in trading volume. It points to a reduction in market depth, making it difficult to execute large orders without significant price impact. Such signals suggest underlying market fragility.
Context ∞ News reports often discuss liquidity stress signals during periods of high market volatility or regulatory uncertainty in the cryptocurrency space. These signals are closely monitored by exchanges and institutional participants to assess market stability and potential for cascading liquidations. Recognizing a liquidity stress signal is vital for understanding immediate market risks and the operational health of trading venues.
Blockchain Knowledge
Cryptocurrency Foundation
Cryptospace Newsfeed
