Optimal Liquidity Ratios and Depth

Determining Optimal Ratios

Optimal liquidity levels are typically gauged as a 1:1 ratio between liquidity and circulating supply at token generation events (TGEs). Maintaining this ratio prevents high slippage and stabilizes the price discovery process.

Risks of Low Liquidity

Low liquidity can result in substantial price impacts from relatively small transactions, increasing volatility and discouraging investor participation.

Benefits of High Liquidity

High liquidity provides price stability, reduces transaction slippage, and encourages sustained investor interest and engagement, ultimately supporting a healthy ecosystem.