Understanding Liquidity In Crypto

Chit Chat
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GM Tronics in the Forum, today I present with another topic of importance that will be worth learning and sharing ideas with.

What is liquidity in crypto?
Liquidity in crypto = the ease with which a digital asset can be bought or sold without impacting its price. @Okorie
Come and learn.

A liquid market = a high volume of trading and a large number of buyers and sellers, which means that orders can be executed quickly and at fair prices.

Why is liquidity important in crypto?
Liquidity is important in crypto for a number of reasons.

  • Allows users to easily enter and exit the market without having to worry about significant price movements for both risk management and for making profits.

  • Provides price stability. When there is a lot of liquidity in the market, it is less likely that small changes in supply or demand will cause large swings in price.

  • Help to reduce risk. When there is a lot of liquidity in the market, it is easier to find buyers and sellers for your assets, which can help to limit your losses if you need to sell quickly.

How to measure liquidity in crypto
There are a number of ways to measure liquidity in crypto.

  • Look at the trading volume. The higher the trading volume, the more liquid the market.

  • Look at the bid-ask spread. The bid-ask spread is the difference between the price that buyers are willing to pay and the price that sellers are willing to accept.

Why did the crypto market drop 10% with only 0.1% liquidation?

Last week, we all woke up to a shocker: despite only about 1 billion dollars being liquidated, the entire market saw a 10% drop. That’s a significant change for such a small fraction of the market cap. What gives?

The answer lies in #liquidity.
Imagine if Microstrategy decided to sell all its 150,000 Bitcoins. Even if he drops the price by $2,000, he’d only sell a fraction because there aren’t enough buyers. This action alone can cause BTC price to drop significantly.

High liquidity = balanced number of buyers and sellers. This means smoother trades, lesser price impact. Low liquidity? Get ready for big price swings even with small trades

Ever wondered why #crypto is so volatile?
Liquidity is a huge factor. Low liquidity markets mean even small trades can send prices High.

But in a low liquidity scenario? Big players like @Prince-Onscolo @Youngyuppie @Nweke-nature1.com
can easily manipulate prices. When large trades are executed here, the price you get may be vastly different from what you expected.

Even giants like $BTC and $TRX aren’t TOO BIG to the effects of liquidity.
So, next time we see wild market swings, think liquidity!

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Thank you for sharing for those understanding liquidity for the first time, the fact is that Liquidity is very important, have provided a liquidity for a projects or altcoins that has low buy and sells? you go explain tire :joy:

In most cases big players doesn’t trade altcoins that has a low liquidity to avoid stories that touches the heart :broken_heart:

As it stands most project owner provides almost 95%+ of the liquidity which is not healthy, they might wake up one day and decide to pull out the liquidity , then what next? Unknown island :desert_island:

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@Gordian

This is a very good topic and I appreciate you for this but I have questions?

(Q) what are the factors that can affect liquidity in Crypto

(Q2) what are the ways to improve liquidity in Crypto.

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when you are referring to big players don’t add @onscoloadjei he is not even qualified to be called crypto holder

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Thanks for this enlightening piece, liquidity is key before investing in any asset.

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Thanks for your kind words and contributing to this topic.
Together we must learn.

Lols, that is where:-
Liquidity providers = entities that contribute to the liquidity of a financial market by placing buy and sell orders on the order book.

This table has gotten us some tears, I recalled providing Liquidity to stake, at the end of the day.

Liquidity gone, and that was the end

This to me can be nightmare to me. With this, the Founder that provides most of the Liquidity can wake up one day to remove Liquidity and leaving the users and INVESTORS in the DARK

we have had issues and stories like this.

I can vividly share my experience with a project by name
Weswap token where most of the Liquidity came from the project founder. About $100k
( I was just graphic designer and active member then with a small job of Moderator).

The project later had issues with Dumping and at the end
Self funded or self Liquidity providers of Crypto project for me might or mostly end well

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Oh my goodness,
Hope I’m not mistaken to be a project owner from this topic.

Very easygoing, let do this.

  1. Factors affecting liquidity varies from if the Liquidity providers are community based or Single liquidity providers.

To the best of my understanding o.
Factors like,

  • Crypto news or regulation, if it’s goodnews it will be flourish.

  • Interest of users or investors,

  • Trading volume,

  • Nature of project

  1. One good ways to improve Liquidity are
  • Expanding project to be listed or accessible in more crypto exchanges.

Thanks, trust I did good in answering

@manfred_jr thanks for the compliment
Liquidity education is worth taking for crypto users.

Maybe it the opposite

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Mmmm true if a project has not locked its liquidity, it is easy for them to pull out. Some lock theirs for years and some locked and can’t be unlocked

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Hahahaha that’s the truth I am just a commoner :joy:

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Yea, I know of this locked time by project.
Correct me if I’m wrong,. They called it VESTING PERIOD
It’s could be time based that is released after some years.

Have you ever claim AIRDROP and was told on the website or whitepaper that you can complete trade them after 12 month locked time?

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Hmm locked? Wether it’s locked :closed_lock_with_key: for 20 years am sorry to say this we are just surviving by grace in this new era of crypto, if a project can reversed a burned token as they claimed or not even attempted to burn but claim to do so, what else do you think it’s not possible ? Just a thought though :thinking:

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For that 12 months no maybe I am yet to get such an airdrop

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No that one they did not explained it to us well. For example shit liquidity is locked in the contract and no one can removed it.

With what you are saying, it wasn’t burned please

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Clap hand for Jesus,.
Locked or burnt token, it’s left for us to believe which to believe,.

Let take a look at some smart contract that later became not SMART,

The locking period varies.
The project I know from Discord

Their first AIRDROP is not 100% claim at once.
You claim 100% after 12 month
Other could be month.

Others Crypto project could chose to lock their token and release their token after a certain milestone has been reach.

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Oh ok I think the reason is to check dumps from airdrop claimers

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Lols, let me say this one,
It’s just to check dump for a locked period,
After the locked periods is over and everyone claim complete.

Then THE MANNER OF DUMP IS COMPARED TO NONE.
lols

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By then the project would have gotten to the grounds. You know early dumps can kill the project

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Yes, by then it depends on the nature of the problem
If the project display good working condition and good utility or product, then the project will gain ground after AIRDROP with little or no dump after vesting period

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Wow! I have learnt something new today. So there is something called liquidity in crypto market. This is great :joy::joy::joy:
But what I don’t understand is why I am been tagged in a topic I am just learning for the first time :upside_down_face: :sweat_smile:

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Yo bro, good you learnt something new from the post.
no fear cause you a big hand in this crypto market.
I DYOR about you and saw you have one of the big liquidity providers in this crypto space
Kudos