A liquidity pool is a smart contract holding reserves of two tokens, for example a memecoin and ETH. When you buy the memecoin, you add ETH to the pool and take memecoin out, and the price shifts to reflect the new balance.
Why it matters
The size of the pool, its liquidity, decides how much a trade moves the price. In a small pool, even a modest buy or sell can move the price a lot. That means two things.
- Your own trade may cost you more than you expect (slippage).
- A large holder selling can crash the price in one transaction.
Liquidity versus market cap
A token can show a high market cap with very little liquidity behind it. If a $2M market-cap token has $40K in its pool, large sells will move the price sharply, and the market cap figure means little.
How Amplified uses it
Token Check includes a sell-impact estimate, for example "a $1,000 sell moves price ≈2.1%", calculated from the pool's current reserves.
Educational content only. Not financial advice.