When investing in crypto, mcap, volume, supply and volatility are most often key financial metrics – aside of course from project fundamentals, team, community and roadmap which should always come first – when making investment decisions.
When reading through this board, I read a lot about these same metrics too, but I hardly read about Liquidity. Although, the above-mentioned metrics would be very applicable to large cap and mid cap crypto assets, when investing in DeFi crypto assets – specifically small caps or new launches – these metrics should always be considered secondary to liquidity when making early investment decisions.
This applies even more to SmartDeFi tokens, because the only available liquidity is the liquidity locked inside the SD token smart contract itself. One can only liquidate a position There are no centralized exchanges that provide liquidity (re large cap and mid cap listings) and there are no third-party liquidity providers to a decentralized exchange, like PancakeSwap or Uniswap (re DeFi token listings).
SD token market price = BNB or ETH Liquidity inside the smart contract / Token supply inside the smart contract.
In SmartDeFi, mcap doesn't tell anything really. You could have a project with 1.5m in mcap and $30K in Liquidity, but you could also have a project with 1m in mcap with $2.5K in Liquidity. In both cases a relatively small $5K investment would pump the market price like crazy. Significant % increases – or $ price for that matter – as a result from this, doesn't tell us that much either. The $5K pump can create FOMO instantly, while in fact it might only be a single $5K investor with a series of buy orders getting in causing a huge price impact due to the project having low liquidity inside the project.
When investing early in SD, liquidity is key. It does not only tell something about a project’s financial health (can you secure an exit strategy if you need to liquidate at any time), but also about the intentions and behavior of the holders that invested in the project earlier.
This is where (private or whitelisted) presale comes in as key factor to be successful as a project or as investor. Through presale, a project can launch with high liquidity while having already build a strong and loyal group of early but most likely long-term backers to the project. And if indeed proven loyal, the presale investors become the liquidity providers to the SD project, securing a high level of liquidity and thus stability and comfort for new investors in the long run.
As the SmartDeFi space matures, we now see private or whitelisted presale develop into a community standard and projects like SINU and SDOX even provide services to support new projects on presale. And there are some highly liquid projects out there that have taken this road for sure.
Of course, a lot of SD projects have not launched after first having a presale in the earlier days, but the strong ones with actual uses cases and great developers, have come through on their promises and have grown their holders and liquidity organically over the past several months.
Most in DeFi seem to fear projects with significant presale investors, because they could dump when others enter the market. While in fact, if the project is legit and presale investors back the project long-term, they provide a safer and healthier market for any new investor after the project is launched.
Always do your own research. This is not financial advice. Just opinion.