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What Is the Impact of a Flash Crash on Cryptocurrency Liquidity and Spreads?

Flash crashes cause liquidity to vanish, leading to a sudden and dramatic widening of the bid-offer spread.
Greeks.Live09.11.25

What Is the Impact of a Flash Crash on Cryptocurrency Liquidity and Spreads?

A flash crash is a rapid, deep, and brief drop in price. During a flash crash, market liquidity evaporates quickly as traders pull their bids and sellers panic.

This causes the bid-offer spread to widen dramatically. The sudden lack of buyers at high prices exacerbates the price drop and increases transaction costs for those attempting to trade.

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