Meme tokens often trade on extremely thin liquidity, allowing them to perform rapid pumps. Jupiter DEX aims to encourage holding and solid projects, going for a liquidity metric.
Jupiter DEX aggregator may add a metric to single out meme tokens with very low liquidity depth. For Solana memes, sometimes the low depth is a feature, allowing the team to pump the token with minimal effort. A low liquidity pump may easily sway buyers to take up the token at a higher price, just before the crash.
The founder of Jupiter, @weremeow, plans to add a liquidity depth metric as a warning to potential buyers. Most meme tokens may have difficulty to absorb any kind of selling, leading to an immediate price crash even for small orders.
JUP tokens also launched in a decentralized pool, but the project had enough liquidity to support a couple of big exits without crashing. Currently, meme token tools have a proxy metric for volatility, but not a direct metric of the potential to absorb selling.
DEX activity shows disparity between liquidity and volumes
In the most extreme types of tokens, there is a big disparity between liquidity and trading volumes. Liquidity as low as $6K seemingly supports extremely active trading, reaching $7.4M in daily volumes. At this rate, the token is considered risky, due to inflated bot traffic.
The bulk of trades going through the Jupiter aggregator are under $100, coinciding with the drive for low-cost, high-risk token trading. Memes and low-cap tokens also surpassed even native SOL trading volumes, especially after the new trading boom in July and August.
Jupiter is gaining traffic from several Solana DEX, with a dominance of Raydium in the past few weeks. Orca is the other supplier of DEX swaps and traffic. Jupiter aims to offer the easiest tools to research and decide through one app. Currently, each token must be checked manually through other tools to estimate any disparities between the liquidity pool and the trading volumes.
A few high-quality tokens graduate to a deeper liquidity pool after surviving for longer, but even then, Raydium shows a disparity between available liquidity and daily turnover. The numerous transactions are too small to affect the liquidity pool, creating the illusion for stability.
The idea for a new liquidity metric follows attempts to improve the robustness on decentralized trading pairs. Recently, Aerodrome introduced targeted liquidity at a certain price range, aiming at absorbing the most common type of orders. Uniswap has also proposed similar tools for engineered liquidity conditions, with more opportunities in a predetermined price range.
Jupiter may offer additional JUP airdrop
Jupiter may return to its airdrop approach, after a vote on 230M unclaimed tokens. This year’s January airdrop may repeat in some form, to redistribute the tokens or decide on another usage in the ecosystem.
In today’s planetary call, I proposed that the 230M unclaimed JUP from the first Jupuary be used to extend and fund ASR for a few more seasons.
If there’s no major opposition, we will do a formal proposal & move it forward for a vote next week.
Let us know any…
— meow 喵 (@weremeow) September 5, 2024
The excess JUP may be airdropped in the form of Active Staking Rewards (ASR), as a way to incentivize holding the tokens and voting.
JUP is a tool to share in the rewards, with more than 355M tokens staked. JUP tokens are also used to vote in proposals and possibly redistribute the proceeds of the app. Even during slower weeks, Jupiter DEX aggregator produced $1.3M in fees for the best routing and pricing on Solana DEX.
Jupiter DEX awarded 50M JUP tokens for active staking for the past three months. Currently, only 14% of all JUP are unlocked, but the project aims to protect the token from crashing. JUP has been range-bound since its launch in February, trading between a peak of $1.80 and the current level of $0.79.
The Jupiter DAO also voted on reducing the token supply by 30%, making the asset more valuable for holders. Jupiter DEX can work as a fat fee app, but the market value of JUP tokens is also important, to make the investment viable.
The project also aims for a fair distribution of earnings to the team and the community. Based on Bubblemaps, the team cold wallet contains around 47% of all tokens, while the community cold wallet holds 41% of tokens. Both the team and the community control hot wallets with 6.75% of the token supply.
Cryptopolitan reporting by Hristina Vasileva