What causes low liquidity?

Another factor that can trigger a liquidity crisis is a sudden loss of investor confidence. When investors lose trust in a company's ability to manage its finances effectively, they may withdraw their investments, further straining the company's liquidity.

Unexpected economic shocks can also cause liquidity issues. Events like market crashes, political unrest, or natural disasters can disrupt business operations and affect a company's cash flow, making it difficult to meet financial obligations.

A liquidity crisis arises in situations where a company or financial institution finds itself unable to fulfill its financial commitments due to insufficient cash or liquid assets.

BTCC, a leading cryptocurrency exchange, offers a range of services to help mitigate liquidity risks. Its offerings include spot trading, which allows users to buy and sell cryptocurrencies at current market prices, and futures trading, which provides opportunities for hedging and speculation.

Various reasons can contribute to the emergence of such a crisis. Poor management decisions often play a significant role, as they may lead to the misallocation of funds or the pursuit of risky ventures.