Crypto Market liquidity risks

A number of factors has and may contribute to illiquid and fragile markets in crypto-assets and limit the ability of participants to buy or sell crypto-assets. The global emergency disease (Coronavirus) is currently causing a drastic fall in the price of cryptocurrency assets. Investors are pulling out funds because of the fear of the unknown.

Ownership of crypto-assets appears to be concentrated among relatively few market participants, limiting market depth and reducing the capacity of markets to accommodate large trading volumes. Illiquid markets may also exacerbate risks from volatility.

Operational issues on trading platforms can also lead to fragmented market structure. While a strong network of regulated trading platforms, brokers, and dealers can increase market liquidity by connecting buyers and sellers, most crypto-asset trading platforms globally are not
registered as regulated exchanges, and many have experienced service disruptions or hacking that have halted or limited the ability of buyers and sellers to transact, or resulted in the largescale theft of customers’ and/or the exchanges’ crypto-assets.

Great analysis