What Token Founders Get Wrong About Liquidity

By the Raven Trading team

About 85% of tokens launched in 2025 are trading below their initial valuations. The median decline is over 70%. These numbers come from Memento Research, which tracked 118 token generation events last year, and they tell a story that goes well beyond "the market was bad."

Many of these projects had solid technology, credible teams, and real VC backing. What they did not have was a sound understanding of how liquidity actually works, what it requires, and why the assumptions that most founders bring to the problem are wrong.

This article is about those assumptions. We are writing it as a market maker that works with token projects, because the misconceptions we see founders carry into liquidity conversations are remarkably consistent. Fixing them early changes outcomes.

Mistake #1: Treating Liquidity as a Launch-Day Problem

Most founders think about liquidity in the context of their TGE. They focus on making sure there are orders in the book when trading starts, surviving the first 48 hours, and getting through the initial volatility without a catastrophic price collapse. Then they move on to other things.

This is backward. Launch-day liquidity is the beginning of the problem, not the solution. The projects that succeed are the ones that treat liquidity as ongoing infrastructure, something that needs to be planned, monitored, and adjusted continuously for months and years after listing.

The reason is straightforward. Markets are not static. Trading volumes fluctuate. New exchange listings create new venues that need liquidity. Vesting unlocks introduce periodic sell pressure. Market-wide drawdowns test order book resilience. Each of these events requires active liquidity management, and projects that assume their market maker will handle everything on autopilot often discover that "autopilot" means "nobody is paying attention."

Liquidity is not a checkbox. It is a living system that requires the same level of ongoing attention as your product, your community, and your treasury.

Mistake #2: Confusing Volume with Liquidity

This is one of the most common and most dangerous misconceptions. Founders look at their token's daily trading volume and conclude that their market is liquid. Volume and liquidity are related but not the same thing.

Volume measures how much trading activity has occurred. Liquidity measures how much trading activity the market can absorb without significant price impact. A token can have high volume but poor liquidity if the volume is concentrated at the top of the order book with nothing behind it, or if the volume is largely wash trading that creates the appearance of activity without actual depth.

The metrics that actually matter for liquidity are the bid-ask spread (how much it costs to execute a trade), order book depth (how much capital is resting at various price levels), and slippage (how much worse the execution price gets as trade size increases). A token with $10 million in daily volume but a 3% spread and $20,000 of depth within 2% of mid-price is poorly liquid, regardless of what the volume number says.

Founders should be monitoring spread, depth, and slippage alongside volume. If your market maker's reporting only covers volume, you are missing the metrics that actually determine your token's trading quality.

Mistake #3: Thinking the Cheapest Market Maker Is the Best Deal

Early-stage projects are typically capital-constrained, and the loan option model, where the project lends tokens to the market maker at no upfront cash cost, looks like the obvious choice. On paper, it costs nothing. In reality, it can be the most expensive decision a founder makes.

The loan option model works when it is carefully structured with strong contractual protections, defined KPIs, and restrictions on how the market maker can use loaned tokens. It fails when the market maker's incentives are misaligned: when the agreement allows them to profit by selling loaned tokens into the market, driving the price down, and exercising their option at a favorable price.

The Movement Labs MOVE scandal in 2025 was the most visible example. A market maker received roughly 5% of the total token supply and liquidated $38 million worth of tokens the day after listing. Binance banned the market maker. Coinbase delisted the token. The co-founder was suspended. But the pattern has played out across dozens of less-publicized projects.

The retainer model, where the project pays a fixed monthly fee for defined services, costs cash. But it also creates clearer accountability: the market maker earns its fee by delivering measurable performance, not by trading your tokens for proprietary profit. For many projects, the retainer is cheaper in the long run because it avoids the catastrophic downside scenarios that poorly structured loan agreements create.

The cheapest deal is not the one with the lowest sticker price. It is the one that delivers the best risk-adjusted outcome.

Mistake #4: Launching at an Inflated FDV with Minimal Float

This is a structural problem that has become endemic. Projects raise multiple private rounds at escalating valuations, then list with a high fully diluted valuation (FDV) and a low percentage of tokens in circulation. The result is a price that private investors paid far less for than what public market participants are being asked to pay, with a massive overhang of locked tokens scheduled to unlock over the following months and years.

This creates a liquidity trap. The circulating supply is too small to generate meaningful organic trading activity. Market makers are providing most of the visible volume. And every vesting unlock introduces a wave of sell pressure from investors who bought at a fraction of the current price and are economically incentivized to sell.

The best market maker in the world cannot solve a fundamentally broken supply structure. If your token's circulating supply at launch is 5% of total supply and your FDV implies a valuation that public markets will not support, no amount of liquidity provision will prevent the price from declining toward a level the market considers fair.

Founders should stress-test their launch parameters against realistic demand scenarios, not just optimistic ones. What happens to your price if every unlocked airdrop allocation sells on day one? What happens when the first vesting cliff hits? If the answer is "the market maker will absorb it," the plan is not robust.

Mistake #5: Not Understanding What Your Market Maker Is Actually Doing

Many founders sign a market-making agreement and then never look at it again. They do not monitor their token's spread, depth, or order book health. They do not review the market maker's reporting (if any exists). They do not know whether the market maker is maintaining the agreed KPIs or whether they have quietly widened spreads, reduced depth, or started taking directional positions in the token.

This is the equivalent of hiring a contractor to build your house and never visiting the construction site.

At minimum, founders should receive regular reports from their market maker covering actual spread versus the agreed target, order book depth at defined distances from mid-price, uptime percentage, and any unusual trading activity. Ideally, this data should be independently verifiable against exchange order book data.

If your market maker is unwilling to provide this reporting, or if the reporting they provide is vague and unverifiable, that is a problem. Transparency is not a luxury. It is how you ensure that the capital or tokens you have committed to the relationship are generating the market quality your project needs.

Mistake #6: Ignoring DeFi Liquidity Entirely

Many token projects focus exclusively on centralized exchange listings and treat DeFi as an afterthought. This made more sense five years ago. It does not make sense in 2026, when DEX trading accounts for over 20% of total crypto volume and growing.

If your token is available on Uniswap or another DEX, the liquidity in those pools directly affects your token's price and trading experience, even for traders on centralized exchanges. Arbitrage bots continuously link prices across CEX and DEX venues. If your DEX pool is thin, it becomes a source of price instability that propagates to your centralized exchange markets.

DeFi liquidity requires different management than CEX liquidity. AMM pools need to be seeded with appropriate capital, concentrated liquidity positions need active management, and on-chain order books require dedicated attention. Projects that work with market makers capable of operating across both CeFi and DeFi, rather than just one or the other, have a structural advantage in maintaining consistent pricing and deep markets across all venues where their token trades.

Mistake #7: Expecting Liquidity to Create Demand

This is perhaps the most fundamental misconception. Liquidity enables trading. It does not create demand for your token. A perfectly liquid market for a token that nobody wants to buy is still a market where the price goes down.

Founders sometimes approach market making as if providing liquidity will, by itself, attract traders and investors. It will not. Liquidity reduces the friction of trading. It makes the experience of buying and selling your token smoother and cheaper. It supports price stability and signal quality. But it cannot substitute for genuine demand, which comes from product utility, community engagement, ecosystem growth, and the fundamental value proposition of the project.

The projects that manage liquidity well are the ones that treat it as infrastructure that supports their broader growth strategy, not as a growth strategy in itself. A great market maker can ensure that when demand arrives, the trading experience is excellent. They cannot manufacture the demand itself.

What Good Liquidity Management Looks Like

The founders who get liquidity right tend to share a few characteristics.

They treat liquidity as a line item in their operating budget, not a one-time cost. They allocate resources to ongoing monitoring and management, whether through internal capabilities or through active engagement with their market maker.

They choose market makers based on alignment and capability, not just cost. They look for firms that deploy their own capital (prop capital models), commit to defined KPIs, provide transparent reporting, and have the infrastructure to operate across CeFi and DeFi.

They plan their tokenomics around realistic liquidity scenarios, stress-testing supply structures against bear-case demand assumptions and ensuring that vesting schedules, airdrop mechanics, and circulating supply at launch are designed to support sustainable market conditions.

They monitor independently. Even with a strong market maker, the project should have its own visibility into order book data, spread trends, and depth metrics. Trust but verify.

And they understand that liquidity is a means to an end, not the end itself. The goal is a healthy, functioning market that serves traders, investors, and the project's long-term growth. Everything else is tactics.

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