How Does a Sudden Token Dump Affect Market Liquidity? ▴ Learn

How Does a Sudden Token Dump Affect Market Liquidity?

A sudden token dump, where a large holder sells a massive amount of tokens, significantly reduces market liquidity, especially on decentralized exchanges (DEXs). The large sale quickly drains the available tokens in the liquidity pool, causing a massive price slippage and making it difficult for other traders to execute orders at a stable price.

This leads to a rapid price crash and high volatility.

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