When participating in the cryptocurrency market, most retail investors often only focus on price fluctuations – looking at K-lines, monitoring green and red candles, and then making buy and sell decisions. But a factor much more important than price is often overlooked: Liquidity.

Liquidity is the measure of the safety of capital and your ability to exit trades smoothly. In other words: prices can 'skyrocket', but if liquidity is weak, there may be no one to buy when you need to sell.

Why is Liquidity So Important?

  • For retail investors: liquidity determines whether you can sell the token at a reasonable price. If the trading volume is thin, even a moderate sell order can cause the price to drop sharply.

  • With altcoins: most fluctuations are based on short-term capital flows. Once the cash flow exits, the price can drop straight down, liquidity freezes, leaving you 'stuck with your assets'.

How to Assess Liquidity Through Trading Volume

A simple yet extremely effective indicator is the spot trading volume in 24 hours. However, you should not only look at 1-day data as it can be manipulated by 'pump and dump' teams.

👉 Standard method: Take the 30-day average of daily trading volume to observe.

  • If the volume remains stable, it indicates that the token is receiving real interest from the cash flow.

  • If the volume only 'jumps' for a few days due to news or pumps, then quickly depletes → dangerous.

Personal Standard: 30-Day Average > 5 Million USD/Day

  • Under 5 million USD/day: usually coins that are less supported by market makers, prices can be easily manipulated by a few small capital groups. When cash flow exits, prices collapse quickly, making it very difficult to sell.

  • Over 5 million USD/day: strong liquidity, stable cash flow in and out, with market makers maintaining it. Only this type has the 'legs' to go far:

    • When the price rises, the upward momentum is more sustainable.

    • When the price falls, there is still buying support, making it hard to drop to 'zero'.

Action Suggestions for Investors

  1. Review your portfolio:

    • Which tokens maintain liquidity > 5 million USD/day (30-day average) → can hold long-term, reducing the risk of 'getting stuck'.

    • Which tokens have thin volume, only active when there is news → should be considered as speculative assets, buy quickly - sell quickly.

  2. Combine with other factors: besides liquidity, you can refer to market capitalization, listing levels on top exchanges, or community participation.

  3. Risk management mindset: instead of just looking at 'is the price increasing?', ask yourself 'if I want to sell, can I sell immediately?'.

Conclusion

In altcoin investing, price is just the surface. What determines safety and exit capability is liquidity.

Remember: a token can increase several times due to news waves, but if liquidity dies, your profits only exist on the screen, never able to withdraw to a wallet.

Therefore, make it a habit to compare the 30-day average volume before deciding to buy or hold any coin. This is a simple yet extremely practical way to distinguish between coins worth holding and those to stay away from.