Under normal market conditions, market illiquidity is typically short-lived, in particular since it creates profit opportunities for traders who, by providing extra funding liquidity, support the price discovery process and restore the smooth functioning of the market.
In contrast, during a severe turbulence the disruption of the mechanisms channelling liquidity – be it through assets prices or the balance sheet of financial institutions – may also deeply and lastingly perturb the functioning of markets, ultimately creating risks for systemic imbalances. The current episode is an example of this.