When you trade tokens on Ethereum or another blockchain, you might find that the price you’re quoted is much lower than it should be. This is often caused by low liquidity: there is not enough of the token available to complete your order at the market price. If you want to buy $10,000 of a meme coin when there’s only $5,000 available, you may end up throwing your money away.

Matcha’s Liquidity Score is a feature that shows just how deep liquidity is on any of the 9+ million tokens we support. The Liquidity Score measures how many tokens are available at the displayed price, and tells you how big a trade the market can handle without impacting the price by 2.5% or more. So you can see before you trade if you’re likely to run into liquidity issues.

What is liquidity?

Liquidity is the amount of an asset available on the market. If 10 people all want to sell 100 tokens at the current market price, there is a total of 1000 tokens of liquidity. That means you could buy 1000 tokens without the price changing.

But not everyone is willing to sell at the same price. Another 10 people may be selling another 100 tokens each at increasingly higher prices. So, if you wanted to buy 2000 tokens, you would pay more and more for every 100 tokens past the initial 1000.

And if you wanted 3000? Well, since there’s only 2000 tokens available, you can keep adding increasing your offer and you’ll still end up with just 2000 tokens and get a bad deal.

Now that’s only one market. Crypto liquidity is usually isolated to specific DEXs, so while one might only have 2000 tokens available at a range of prices, another could have 4000 more.

Matcha is special because it connects hundreds of exchanges and can see where the deepest liquidity is, and will take your order for and execute it through multiple DEXs if needed to get you the best overall price.

How to use liquidity scores

Liquidity scores in Matcha give you information about how many tokens are available at a glance, across all the connected exchanges. Each token page now has a liquidity score shown directly in the token header and you can hover over the score to see how much liquidity is available as a dollar value.

• A score of 1 means only $100 of tokens are available within 2.5% of the market price.
• A score of 5 means $100,000 of tokens are available.
• A score of 7 and above means you can safely trade a million dollars or more without paying more than 2.5% above market price.

That means if you have $10,000 to invest, you will want to check that the asset you’re buying has a score of 3 or higher, to ensure you will get a fair price. Of course, the Matcha trade module will also alert you if your trade is going to cause significant price impact.

While established tokens often have enough liquidity to support huge trade sizes, liquidity scores are especially useful for memecoins, AI tokens, and other long-tail tokens. Now you can see at a glance how much volume a specific token can handle and adjust your trade accordingly. And we’ll even show which exchanges have the most liquidity available!

Stay informed with Matcha

Knowing where liquidity is and how deep it runs is an essential part of an effective trading strategy. Not only do they help you work out how much to trade for optimal pricing, but they can also alert you to potential scams such as lookalike tokens or dead projects.

Liquidity scores are just one of the ways we’re improving your trading experience. Keep an eye out for other token information features in the coming weeks, built to keep you safe and in profit!