Tight liquidity describes a market condition where there is a scarcity of readily available assets for buying and selling without significantly impacting prices. In digital asset markets, this means large orders can cause substantial price movements due to limited order book depth. It indicates low trading volume and reduced market depth.
Context
Periods of tight liquidity in cryptocurrency markets often coincide with high volatility or uncertainty, leading to amplified price swings. News reports frequently attribute sudden price movements to tight liquidity, especially during off-peak trading hours or after significant market events. This condition presents challenges for large institutional trades and can increase trading costs for all participants.
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