Definition ∞ A low liquidity market is characterized by a limited number of buyers and sellers, resulting in sparse trading activity and wide bid-ask spreads for digital assets. In such a market, large orders can significantly impact an asset’s price, leading to increased volatility and slippage. Executing trades can be challenging, as there may not be sufficient counter-orders to match desired volumes. This condition often indicates lower market confidence or interest.
Context ∞ Cryptocurrency news frequently references low liquidity markets, especially for newer or smaller altcoins, where price manipulation and sudden price swings are more common. This market condition poses risks for both retail and institutional investors, as it can hinder efficient entry and exit from positions. Discussions often revolve around strategies to attract more market makers and increase trading depth to improve overall market health.
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