Yesterday I shared about liquidity.
now we learn more deeply about exit liquidity.
What is Exit Liquidity?
As we know, the market operates based on liquidity or the amount of money available in the market. High liquidity allows market participants to enter and exit the market without significantly affecting asset prices. Meanwhile, low liquidity can significantly affect prices when market participants exit or enter the market.
In some cases, liquidity can be created and manipulated. Generally, new crypto projects are targeted because they have small capitalization and low liquidity. This condition can then be exploited by investors with large ownership stakes, commonly known as whales.
Whales will not sell when liquidity is low to avoid a crash. Therefore, they will strategize by increasing the liquidity of the asset. The way they do this is by spreading hype about the asset they intend to sell. If successful, this hype can attract investors to buy their assets due to FOMO.
With standby buyers, whales can sell their assets without worrying that the price will drop significantly. After the whales sell their assets, the price gradually starts to fall.
If standby buyers hold onto their ownership or are late in selling their assets, they risk losing money by buying assets at high prices. They are then referred to as exit liquidity. Thus, exit liquidity can be concluded as investors who buy assets at high prices and then become liquidity for early investors to exit the market and reap profits.
So, stay alert because fundamentally, in the crypto world, it's about how to survive. We need to learn and, more importantly, protect our assets so they can grow and not lose all our capital.
No matter how hard the fishermen work, they will not go fishing in stormy weather, but will carefully guard their boats. This season will surely pass, tomorrow there will still be another opportunity.
stay DYOR.