Cryptocurrency Projects & Founders overlook the part where the Tokenomics needs to be aligned with upcoming Market Making activities that are crucial for the project when it hits the exchanges, which in turn leads to price instability and liquidity problems
Here are some classic examples —
– Vesting unlocks can create major sell pressure, across the token’s life cycle, there are variable emissions, which cause different levels of sell pressure. If you haven’t mapped out liquidity provisioning for these phases, expect volatility spikes and weak order book depth
– Many projects don’t allocate liquidity budgets upfront, assuming they can “figure it out later.” No budget means ineffective market-making, which leads to price slippage and poor trading conditions. This is a bad idea.
Note — Investors look at liquidity depth, spread consistency, and price stability before entering a project, if you don’t have that, institutional buying is not going to happen.
– Launching without an inflationary mechanism while expecting MM to compensate? That’s flawed logic. Tokenomics should have well-defined supply dynamics instead of relying on external fixes. You need to align with your potential MM partner before you launch.
– Everyone talks about the sell side liquidity and sell pressures as they are more common than buy side liquidity, but ignoring buy-side liquidity is another mistake. Structure proper bid-side liquidity, to avoid gaps in the order books.
– CEX and DEX liquidity must be managed together. MM cannot stabilize price effectively if liquidity is fragmented across different trading venues, you’ve heard about arbitrage, right? That needs to be controlled.
Also, a simple reminder — If you don’t maintain your +2/-2% spread, your token can temporarily stop being displayed by exchanges, CoinMarketCap, etc.
Probably next week, we will run a deep dive on some projects that got this thing messed up.
In the meantime, if you need help with your tokenomics or advisory for your project, reach out to me or www.blockphrase.com!
Image credits — CoinMarketCap
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