Definition ∞ Market illiquidity describes a condition where an asset cannot be easily bought or sold without significantly impacting its price. This state occurs when there are insufficient buyers or sellers in the market, leading to wide bid-ask spreads and difficulty in executing large orders at desired prices. It often results in increased price volatility and can deter large institutional participants. Illiquid markets present higher risks for investors seeking to enter or exit positions quickly.
Context ∞ News often discusses market illiquidity during periods of extreme market stress or for assets with low trading volumes. This condition can exacerbate price crashes or make it challenging for investors to react to new information. Addressing market illiquidity through increased market depth and participation is a continuous goal for exchange operators and protocol developers.
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