The liquidity hunting of meme coins and alts, are we the hunters or the prey?

Although this post by Trump was ultimately proven to be false, it still realistically reveals the brutal side of the market.

TRUMP: NO CRYING IN THE CASINO pic.twitter.com/d0rK567Bth

— Nox| (@noxflux) March 10, 2025

The term "liquidity" is always circulating in the market, sometimes it's the standard for retail investors to get on board, other times it's a trap set by the big players to entice people to jump in. Here are some insights, hoping that when you sit at the gambling table, you can see the chips of the opponent more clearly and ultimately leave with a smile. (The "big players" mentioned here refer to the major figures controlling the market, which could be VCs, institutions, exchanges, KOLs, etc. You can interpret this as you see fit.)

Is "low circulation, high control" our friend or foe?

The Bitcoin ( BTC ) ETF, approved in 2021, ignited this round of market growth. Over the past four years, Bitcoin ETFs have quickly become a golden goose for issuers like BlackRock. However, this time it is different from the flood of capital into cryptocurrencies before and after the pandemic; the inflowing funds are halted in the custodial accounts of ETFs and have not entered the altcoin market, leaving many high market capitalization and high liquidity "VC coins" trapped in a liquidity deadlock.

I believe many of you still have some tomorrow's stars from the last round of the market's overvaluation, but they have not shown any signs of life this time, and some haven't even stood up. The good news is that it's not just retail investors who are suffering; the whales have also been wiped out. In the current era dominated by Meme (, whales can play a role in inflating the market capitalization further. The rapid rise of a certain meme coin is nothing more than a massive influx of funds into low market cap assets. Those who control resources, the "whales," can quickly gather their communication chains, capital efficiency, etc., to create a prosperous scene, which gives birth to the so-called "demon coins."

Ultimately, this is just an evolved version of a money game. Immature dealers can easily be seen through, and only a fool would play their game. The retail investors at the top ignore risks and capital management, and naturally become casualties. Keeping your sanity at all times is the only answer; please fight against your own greed.

The counterintuitive token economic model

The meme coins that are currently surging have an unspeakable secret behind them. The so-called fair launch is not a true market mechanism, as it involves transferring from the internal market to the external market. Many tokens are backed by professional studios that mass-produce them, with the production process flowing seamlessly from capturing market hotspots, bulk unmarked wallet trading volume, marketing after launching on the external market, to creating momentum on Twitter before X ) and finally, the last mile of being listed on exchanges is also part of the production line.

You might think that everything here is a conspiracy and that they have taken all the money, but in fact, these market makers also bear significant risks and losses. During the peak of the Solana meme last year, nearly twenty thousand meme coins were generated in a single day, but only a tiny fraction made it to exchanges. Tokens that are not noticed by the community must be eliminated, and a new batch is needed to fight again. The generation of tokens on the chain and the manipulation of trading volume are not small costs of wear and tear.

The reality is that the dealers are incurring costs to attract the attention of everyone in the market. Low circulation and high control are essential props for them to perform this grand show. Whether the performance is glamorous and whether it attracts the market's buy-in depend on each individual's ability to make efforts and appeal.

In the contract market, the script of shorting and long killing long.

The image is for illustration.

Finally, the targets that have caught the market's attention all share the same characteristic, which is that they have only a small amount of tokens circulating in the secondary market.

Due to the extremely small circulating supply, creators can dominate the price with relatively low costs, creating a prosperous appearance. In the early and middle stages of these meme coins' crazy growth, the circulating quantity will not significantly increase. The imagined profit-taking from dumping is not the profit path for these players; real profits start after being listed on exchanges, specifically after completing the "contract" for listing.

The settlement of perpetual contracts is determined by the Mark Price (, not triggered by the Last Traded Price ) on the order book, because the latest traded price can fluctuate sharply in a short period and is easily manipulated. The Mark Price varies slightly based on the formulas of different exchanges, but is determined by adding a decaying funding rate to a common Index Price (. The Index Price is generated by the weighted average of the spot prices and trading volumes of the asset across various exchanges.

This gives these high-controlled, low-circulation tokens a stage to perform.

According to the correlation between the open interest ) and funding rate data of the exchange's contracts, the market makers can accurately estimate the liquidity volume below and above the current price. For example, during a price increase, if both the open interest and funding rate are rapidly increasing, it indicates that market participants are increasing their exposure to the underlying asset. The market makers can then position short orders above and sell in the spot market, triggering a liquidation drop. Conversely, in scenarios with negative funding rates, they can position long orders below and buy heavily in the spot market, resulting in a short squeeze.

A large number of contracts being forcibly liquidated in a short period will generate a massive market order, providing the market controllers with extremely favorable prices to liquidate their positions (, whether it is the liquidation of contracts or the buying or selling of spot ), this process is the generation of liquidity.

Speculative trading, the art of risk and opportunity

Overall, the entire cryptocurrency market belongs to a risk market, enjoying the opportunity for excess returns while also bearing corresponding risks, which is an unchanging theorem for both large capital players and small retail investors.

During the process of the dealer setting up the game, it also tests their ability to control chips and funds. A careless mistake could ruin the game, meaning that all the initial investments would go down the drain. In the community, there are often shouts of "dog dealer, dog dealer," but we should occasionally think for them. After all, who wants to be a dog when they can be a person? The hardship behind the glamorous shouting and hard work in the market is seldom spoken of.

Retail investors should actually be proud of themselves. No one is dancing in the dance floor; no matter how beautiful the decor or how passionate the music is, it doesn't matter. We are the ones being catered to by those holding large amounts of capital. But remember to leave gracefully at the most passionate moment, otherwise you will be the last one left to clean the floor.

This article on the liquidity hunting of meme coins and altcoins asks whether we are the hunters or the prey? It first appeared in Chain News ABMedia.