What Are the Risks of Trading on Low-Liquidity Exchanges?

The primary risks of trading on low-liquidity exchanges are price slippage, wider bid-ask spreads, and increased market manipulation. Price slippage occurs when a large order is placed, causing the price to move significantly before the order can be filled.

Wider bid-ask spreads mean that traders have to pay more to buy an asset and receive less when they sell it. Low-liquidity exchanges are also more susceptible to market manipulation, as it is easier for a single entity to influence the price of an asset.

Additionally, low-liquidity exchanges may have a higher risk of insolvency or security breaches.