A thin order book describes a trading environment on an exchange where there are relatively few buy and sell orders at various price levels. This lack of depth indicates low liquidity for a particular asset. In such a market, even small trades can cause significant price movements, leading to high volatility and increased slippage. It makes assets susceptible to price manipulation and large price swings.
Context
Thin order books are a common characteristic of smaller, less liquid cryptocurrency markets, making them particularly susceptible to sudden price shifts. News often reports on instances where large trades on these assets cause dramatic market reactions. Improving liquidity through increased market participation and advanced market-making strategies remains a constant objective for exchange operators and project developers.
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