Liquidity Checker

Available for the following blockchains: Solana, Ethereum, Base, Polygon, BSC, Blast, Avalanche, Arbitrum

Liquidity Checker

What is the Liquidity Checker?

The Liquidity Checker is a crucial component of Divine's security system that assesses the liquidity health of a token. Think of it as a financial lifeguard that ensures there's enough "water" (liquidity) in the pool for everyone to swim (trade) safely.

How does it work?

  1. Data Collection: The checker gathers key financial data about a token, including:

    • Current liquidity in USD

    • Market capitalization

  2. Minimum Liquidity Check: It first checks if the token's liquidity meets a minimum threshold.

  3. Market Cap to Liquidity Ratio: If the minimum liquidity is met, it calculates the ratio of market cap to liquidity.

  4. Threshold Comparison: This ratio is then compared against a predefined maximum threshold.

  5. Risk Assessment: Based on these checks, the system determines if the token's liquidity situation poses any risks.

Why is this important?

Liquidity is crucial for a healthy token market. The Liquidity Checker helps Divine:

  • Identify tokens with dangerously low liquidity, which could lead to high price volatility

  • Detect potential "rug pulls" where developers might drain liquidity

  • Ensure that tokens have a healthy balance between their market value and available liquidity

  • Protect users from tokens that might be difficult to sell due to liquidity issues

Key Features

  • Minimum Liquidity Threshold: Flags tokens that don't meet a basic liquidity requirement

  • Market Cap to Liquidity Ratio Analysis: Examines the relationship between a token's total value and its tradable liquidity

  • Configurable Thresholds: Uses adjustable parameters to adapt to different market conditions

  • Detailed Reporting: Provides specific reasons for any flags raised during the check

Benefits for Divine Users

  • Rug Pull Protection: Helps shield users from potential liquidity-based scams

  • Volatility Awareness: Identifies tokens that might be subject to high price swings due to low liquidity

  • Exit Assurance: Ensures users are less likely to get stuck with tokens they can't sell

  • Market Health Insights: Provides a key indicator of a token's overall market health

Limitations

While the Liquidity Checker is a powerful tool, it's important to note:

  • Liquidity can change rapidly, especially for new or volatile tokens

  • A token passing the liquidity check doesn't guarantee it's a good investment

  • Some legitimate projects might temporarily have low liquidity during early stages

  • It's one of several checks Divine uses; always consider the overall assessment

Remember, while Divine works hard to provide these insights, it's always important to do your own research and invest responsibly. Liquidity is just one aspect of a token's overall health and potential.

Last updated

Copyright 2024 DIVINE. All rights reserved.