[Ethereum] How much liquidity to provide to Uniswap


So you deployed your brand new ERC20 token to Uniswap. I understand you need to provide liquidity for your token pair in Uniswap so people can start buying your token. Now, what I'm trying to wrap my mind around with is if the liquidity you provided was sold off, would that mean your token cannot be bought anymore?

Best Answer

Whoever provides the liquidity has the option to take his share of the liquidity out of the pool, at any time they want. Liquidity is never "sold off" as such, since Uniswap price is based on a bonding price curve. So the trading price simply changes between trades, reflecting which asset of the pair is bought more and which sold.

There is also no "correct" amount of liquidity you need to provide. You can provide as little as you want, or as much as you want. Remember that anyone else can also provide liquidity. Also remember, that if you provide only very little liquidity, the price will change fast and people will most likely stop trading. So the more liquidity there is, the more stable the price.

Neither asset of the pair can ever be bought fully - there is always a little bit left. So, at least in theory, the pool will remain functional always, no matter what the asset ratio is and no matter how much liquidity there is.

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