Many people make the mistake of trading, thinking that high-market-cap tokens have limited growth potential and that a lot of money is needed to raise the price of a token. This idea ignores the impact of liquidity, which can make the price go up with very little investment.

Liquidity refers to the ease of buying or selling a token without affecting the price. High liquidity means there are many buyers and sellers, so that transactions are completed quickly and the price changes are minimal. Low liquidity leads to larger price fluctuations, making trading more difficult.

For example: a token costs $1 and its market capitalization is $1 billion. However, only $100 million worth of the token is traded on the exchange. Now, if someone buys $50 million worth of the token, the price of the token will double to $2. Despite only investing $50 million, the total market capitalization of the token will increase to $2 billion.

In cryptocurrencies, low liquidity allows token prices to rise quickly with less investment.

Many people who buy local dogs often encounter a problem. The market value of the token is high but the liquidity is very low. Big players will use this to manipulate the market and list it on some decentralized exchanges with small liquidity pools to manipulate prices, leading to FOMO.

To avoid liquidity manipulation, dog dealers do not need much money to affect the price of the currency. You must pay attention to this when choosing a currency.

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