How do low liquidity conditions amplify Bitcoin’s price swings during market events?
Why is this the correct answer?
In a low liquidity environment, there aren’t enough participants to absorb buy or sell orders smoothly. When a large order hits the market, it can move prices drastically because there aren’t many orders on the other side to balance it. For beginners, understanding liquidity helps explain why thin markets can see exaggerated swings during news events or large trades.
Related Terms
AI-Generated Content Disclaimer
Important Notice: This content has been generated with the assistance of artificial intelligence. While we strive for accuracy, there may be errors or inaccuracies in the information provided. Please exercise caution and verify any information before making decisions based on it. This information does not constitute investment advice, financial advice, trading advice, or any other sort of advice. You should not treat any of the content as such. CryptoMeteo does not recommend that any cryptocurrency should be bought, sold, or held by you. Always conduct your own due diligence and consult with a financial advisor before making any investment decisions.