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Question #495

Why can a flash crash on an illiquid exchange trading pair lead to large temporary Bitcoin price swings?

Catégorie: General
Illiquid pairs lack depth, so small trades cannot move Bitcoin price
Illiquid pairs lack depth, so small trades share Bitcoin price movement
Illiquid pairs lack depth, so small trades swing Bitcoin price wildly

Pourquoi est-ce la bonne réponse?

This is correct because markets with thin order books cannot absorb even modest buy or sell orders without moving price substantially. Beginners should know that low liquidity environments magnify the impact of each trade, causing exaggerated temporary price swings until deeper markets resume normal trading activity.

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