The community is buzzing with enthusiasm.

The team is selling super hard.

Yet, on launch, it’s a dud.

The chart hardly moves an inch.

Initial buyers get bored.

They sell and move on.

Everyone blames the team and marketing.

Months (or years) of work is wasted due to one mistake: Liquidity.

Have you seen this pattern before? No doubt you have!

How to move a chart: Liquidity

Very few founders I speak with actually know what drives their token’s price.

How do I know? None have been aware of this simple concept I’m about to share with you today.

Breaking down buying volume vs liquidity…

Project 1

Liquidity pool: $1,000,000
Buy: $10,000 (1% of LP)

Project 2

Liquidity pool: $100,000

Buy: $10,000 (10% of LP)

The same $10,000 buy into these two separate pools will have a dramatic difference in price movement.

It only makes logical sense, right?

$10,000 is such a smaller portion of $1,000,000 than it is $100,000.

“Wen marketing”

What if the project shot themselves (and the marketing agency) in the foot through having too much liquidity?

I’ve seen this story play out time and time again.

The marketing agency follows their blueprint, yet nobody thinks to check liquidity and understand the volume actually needed to drive upwards movement.

I hate to say it, but this entire market is about price in the current state.

Not considering what it’ll actually take to move a chart is a key mistake.

Key Point: Price appreciation is the best form of marketing.

No matter how well you’re doing through growth and community, if the price is falling most people think you’re failing.

It’s a strange dichotomy that exists within web3.

Keeping it really simple…

In the above examples, we explored the percentage of the buying volume in comparison to the liquidity.

Whether a founder or investor, if you look at the initial liquidity pool and see $3MM, just know it’s going to take a lot of volume to move that chart.

Not that it’s impossible–it’s just a lot more challenging and requires even more skill.

Example

Liquidity pool: $3,000,000

Buying volume: $300,000 (10%)

With $300,000 in positive buying volume we’d likely see somewhere around a 10% increase in price.

FYI: This varies based on how the pools are set up, but we’ll go deeper into that some other time.

There’s no magic ratio…

What I’ve tried to show you today is more about an amount instead of a set percentage.

If you look at a project’s liquidity pool and see millions of dollars, it’ll likely take millions to move that chart.

What if there’s hardly any liquidity?

We should definitely expect volatility.

Just like a $10,000 sell might raise a price 10% if it has $100,000 in liquidity, it’ll also drop a price just the same.

Finding a careful balance and reasonable amount of liquidity in comparison to market cap is key.

Personally, I love to see 10% of the supply in the DEX liquidity pool.

Generally, this enables a reasonable level of volatility without excessive pumps or dumps.

But, remember that it’s all relative.

A $50MM fully diluted market cap project with 10% of supply in liquidity is $5MM.

When you’re ready, here’s a few areas I can help you:

• Building a simulation of your entire token economy

• Guiding you on overall project operations, launch and scale

• Identifying gaps in tokenomics, a huge pain point for many

• Learn from my 3,500+ hours of live project operations experience

You can book a free strategy call right here: https://calendly.com/tonydrummond/strategy-call