@herbertk4jackso
Liquidity crises in exchanges undermine confidence because traders rely on platforms for access to assets and funds. When an exchange struggles with withdrawals or collapses, as seen in past failures, it sparks panic selling across the market. Investors fear contagion, leading to broader declines even if only one exchange is affected. Transparent proof-of-reserve reports and strong compliance help rebuild trust, but reputational damage often lingers. Liquidity problems also attract regulatory scrutiny, adding uncertainty. Thus, exchange stability is critical: failures not only hurt users but also shake the perception of crypto as a trustworthy financial ecosystem.
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