Crypto investors, beware! Liquidity crises can lead to mass defaults & bankruptcies. Stay informed about the risks and how to protect your assets.
So, what happens during a liquidity crisis? In worst-case scenarios, a lack of liquidity signifies a looming bankruptcy. While no sure-fire red flags show a liquidity crunch is coming, investors should prepare for the worst. This could entail sacrificing the money you have on these exchanges as you will be unable to withdraw your assets.To avoid congestion in the market, crypto platforms hold a 1:1 equivalent cash value in proportion to assets.
An example is the Singaporean crypto exchange and lending platform Vauld, which recently suspended operations. Among the reasons cited for the breakdown were the financial troubles at Celsius Network, the collapse of Terra — now renamed Terra Classic — and the default on its loans by Three Arrows Capital.
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