> ## Documentation Index
> Fetch the complete documentation index at: https://docs.webacy.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Liquidity Risks

> Understand liquidity risks in DeFi tokens, including low liquidity, unlocked LP tokens, slippage, and liquidity pull attacks that trap your funds.

## Overview

**Liquidity risks** encompass dangers related to a token's trading liquidity - the ability to buy or sell without significantly impacting the price. Low, unlocked, or manipulated liquidity is a major risk factor for token investors.

<Warning>
  Insufficient liquidity can trap your funds or result in massive losses from slippage. Always check liquidity depth before trading.
</Warning>

## Why Liquidity Matters

* **Price Impact**: Low liquidity means large trades move prices significantly
* **Exit Ability**: You need liquidity to sell your holdings
* **Rug Pull Risk**: Unlocked liquidity can be removed instantly
* **Market Manipulation**: Low liquidity makes manipulation easier

## Types of Liquidity Risks

### Insufficient Liquidity

* Not enough funds in trading pools
* Large trades cause extreme slippage
* May be impossible to exit large positions

### Unlocked Liquidity

* LP tokens not locked in a timelock contract
* Owner can remove liquidity at any time
* Primary mechanism for rug pulls

### Fake Liquidity

* Liquidity added then immediately removed
* Creates illusion of safe trading
* Often combined with wash trading

### Concentrated Liquidity

* Few wallets control most liquidity
* Can be removed in coordination
* Single point of failure

## Detection Indicators

| Tag                   | Severity | Description                             |
| --------------------- | -------- | --------------------------------------- |
| `low_liquidity`       | High     | Insufficient liquidity for safe trading |
| `unlocked_liquidity`  | High     | LP tokens not locked                    |
| `liquidity_removable` | High     | Owner can drain liquidity               |
| `short_lp_lock`       | Medium   | Liquidity lock expires soon             |
| `concentrated_lp`     | Medium   | Few wallets hold most LP                |

## Liquidity Metrics

| Metric           | Safe Range       | Risk Indicator               |
| ---------------- | ---------------- | ---------------------------- |
| Total Liquidity  | \$50k+           | Below \$10k is high risk     |
| Lock Duration    | 6+ months        | Under 1 month is concerning  |
| LP Concentration | Distributed      | Top holder over 50% is risky |
| Lock Contract    | Reputable locker | Unknown locker is suspicious |

## API Example

```bash theme={null}
# Get liquidity pool data for a token
curl -X GET "https://api.webacy.com/tokens/0x123.../pools?chain=eth" \
  -H "x-api-key: YOUR_API_KEY"
```

Response showing liquidity data:

```json theme={null}
{
  "pools": [
    {
      "address": "0xpool...",
      "liquidity_usd": 125000,
      "token0": "0x123...",
      "token1": "WETH",
      "lp_locked_percentage": 85,
      "lock_expires": "2027-06-01T00:00:00Z"
    }
  ],
  "total_liquidity_usd": 125000
}
```

## Slippage and Price Impact

Slippage increases dramatically with low liquidity:

| Trade Size | \$10k Liquidity | \$100k Liquidity | \$1M Liquidity |
| ---------- | --------------- | ---------------- | -------------- |
| \$100      | 1% impact       | 0.1% impact      | 0.01% impact   |
| \$1,000    | 10% impact      | 1% impact        | 0.1% impact    |
| \$10,000   | 50%+ impact     | 10% impact       | 1% impact      |

## Red Flags

* **Liquidity under \$10,000** - Very high slippage risk
* **No lock or short lock** - Rug pull possible at any time
* **Lock expiring soon** - Monitor closely near expiration
* **Unknown lock contract** - May have backdoors
* **Declining liquidity** - Insiders may be exiting
* **Single LP provider** - Concentrated risk

## Protection Strategies

1. **Check total liquidity** - Ensure enough for your trade size
2. **Verify LP locks** - Use reputable lock checkers
3. **Calculate price impact** - Know your slippage before trading
4. **Monitor lock expiration** - Set alerts for unlock dates
5. **Check LP distribution** - Avoid concentrated LP ownership
6. **Use limit orders** - When available, to control slippage

## Evaluating Liquidity Locks

A proper liquidity lock should have:

* **Reputable lock contract** - Team.Finance, Unicrypt, PinkSale, etc.
* **Sufficient duration** - Minimum 6 months, ideally 1+ year
* **Majority locked** - At least 80% of LP should be locked
* **Verified on-chain** - Independently verifiable, not just claimed

## Liquidity Monitoring

Instead of polling, subscribe to [Webacy webhooks](/essentials/webhooks) to get pushed a signed event the moment a token's risk tier changes. Create a subscription with your API key:

```bash theme={null}
curl -X POST "https://api.webacy.com/webhooks/subscriptions" \
  -H "x-api-key: YOUR_API_KEY" \
  -H "Content-Type: application/json" \
  -d '{
    "webhookUrl": "https://yourapp.com/webhooks/webacy",
    "eventTypes": ["DEPEG_TIER_CHANGE"],
    "filters": { "tokens": ["0x123..."], "chains": ["eth"] }
  }'
```

See the [Webhooks reference](/essentials/webhooks) for the full event list, payload shape, and signature verification.

## Related Concepts

* [Rug Pulls](./rug-pulls) - Liquidity removal scams
* [Snipers & Bundlers](./snipers-bundlers) - Launch manipulation
* [Wash Trading](./wash-trading) - Fake volume creation