– A crypto liquidity crunch is when platforms lack the liquid supply of cash reserves and 1:1 convertible stablecoins needed to meet demand all without collapsing market prices.
– Its a bank run.
– There are no specific guaranteed red flags that give an indication of a liquidity crunch, but you need to prepare for the worst.
– The mechanics of a crypto liquidity crunch function differently. In crypto, very few on-ramps allow institutions to transfer large amounts of capital in and out of the market.
– Crypto platforms developed solutions akin to an above-ground rail to alleviate congestion within the system but do not offer an easy way out.
– Aggregated liquidity providers like sFOX can offer deeper pools of liquidity by drawing on more than 30 top exchange sources, including the industrys OTC trading desks, as well as over 80 markets.