Definition ∞ A low liquidity environment characterizes a market state where there is a limited amount of readily available digital assets for buying and selling. This condition results in wide bid-ask spreads and significant price movements from relatively small trades. Transactions can become more challenging to execute at desired prices. Such environments often increase market volatility.
Context ∞ Crypto news frequently reports on low liquidity environments, particularly during periods of market uncertainty or holiday seasons. This market condition can amplify price swings, making assets more susceptible to large individual orders. Traders often exercise caution in such environments due to the heightened risk of price manipulation and slippage.
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