Inital liquidity on Pancakeswap

I have two questions about initial liquidity in pancakeswap :

  1. What is the recommended ratio of initial supply on pancakeswap to get a “realistic” Market cap ?
    It feels like one can put any price he wants on his tokens, but then you get a crazy marketcap.

  2. Also, how many initial liquidity should one offer ? What is the right ratio between liquidity and Marketcap to avoid too much price fluctuations, and high fees ?

  3. If one doesn’t add automatic LP, would the liquidity stay the same as what was initially provided, if no one adds liquidity ?

Hi there!

  1. What is the recommended ratio of initial supply on pancakeswap to get a “realistic” Market cap ?
    It feels like one can put any price he wants on his tokens, but then you get a crazy marketcap.

This is a philosophical question, so these are my opinions, not statements of fact.

In the current market I think 50 BNB per 1 Trillion or 5 ETH is a great amount of Liquidity to have. One of the signs I look for on new tokens is the amount. If they have 1 BNB it tells me they are not a serious token with very limited funding. However I think 5 BNB is doable if you have very little budget. So 5 BNB is minimum.

You can control how much your marketcap is, but ultimately you should look at how much BNB is in the pool. I think Marketcap is a very very very BAD (yes bad) metric for Dex coins (PCS/Uni) because it doesn’t reveal the BNB/ETH in the pool. Although I haven’t seen it done yet, I predict that a new metric will eventually come into play that ratios the total supply down to reasonable levels and quantifies the BNB/ETH in the pool to that ratio’d number.

  1. Also, how many initial liquidity should one offer ? What is the right ratio between liquidity and Marketcap to avoid too much price fluctuations, and high fees ?

As above, I think 5 BNB should be the minimum. Your goal should be 50 BNB for a starting project and work towards gaining more and more buyers, raising the liquidity to 200+ BNB.

1 Trillion is the max supply I would have for a token. I think the days of Quardrillion+ is numbered. My preferred number would be 1 Billion to 100 Billion. Having a giant supply of coins is a marketing gimmick.

Half of the Max Supply should go into the Liquidity, and the other half should be used for budget reasons (not dumping), things like airdrops should be considered.

I’m not sure what you mean by high fees? Can you elaborate? You should set your taxes fairly low, but it just depends on the type of coin you want to do.

  1. If one doesn’t add automatic LP, would the liquidity stay the same as what was initially provided, if no one adds liquidity ?

By automatic LP do you mean the Swap and Liquify mechanism? If so then the Liquidity will change depending on the buyers or sellers through swaps. Read more about AMMs and how they work here. https://uniswap.org/docs/v2/protocol-overview/how-uniswap-works/

For some projects, you should encourage your customers to add their liquidity. More liquidity providers means that the chance of the product being legitimate is much higher. If your liquidity relies on 1 person, they can rug by removing all the liquidity after selling lots of tokens.

@Tsushima_Yoshiko Thanks for clarifying. few more follow up questions

  1. What will happen if whole or 99% of LP is used up? will the users able still buy whatever the remaining fraction of the tokens?

  2. How do we list it other exchanges or to create additional pairs in different exchange, for example MYToken-USDT

  3. is it staking LP better than locking or sending them to dead address?

  1. What will happen if whole or 99% of LP is used up? will the users able still buy whatever the remaining fraction of the tokens?

This will probably never happen by the very nature of the token’s price. Unless they have a massive amount of ETH they will likely never achieve this.

But theoretically “yes”. It depends on how the math is done in the contract. You can drain it down to very little, but too little and the math goes wonky meaning you can’t withdraw it.

  1. How do we list it other exchanges or to create additional pairs in different exchange, for example MYToken-USDT

Create new LP pairs for DEX and have them trade off it. The liquidity fees and other LP tokenomics might not apply to that one.

For CEX that is handled differently. It depends on the CEX, they use centralized wallets. So when you buy/sell you aren’t transferring tokens. You are just buying numbers on the screen.

  1. is it staking LP better than locking or sending them to dead address?

When you stake your liquidity you are providing it to the public through a swapper. You then lock your LP tokens, which means you cannot remove that liquidity.

In my opinion locking it is just a “safety” thing for investors to believe that the project team isn’t going to rug. But the reality is that most project teams “rug” anyways by selling their cut of the tokens that aren’t apart of the liquidity.

Some projects need to lock tokens or funds for a reason, such as AAVE or Yearn. But for most spam tokens (safemoon) it’s just a marketing gimmick.

Regarding the 2nd question,

  1. If I lock all my token in the initial LP (for example in BNB LP), where will get the tokens for creating new LP pairs?

  2. If we create additional LP pairs, will the clones of safemoon works? my understanding is they create a fixed LP pair with pancakeswap

  3. Are you saying CEX doesn’t require new LP pairs?

  1. If I lock all my token in the initial LP (for example in BNB LP), where will get the tokens for creating new LP pairs?

Nowhere, you will be unable to make new pairs if you locked all your tokens away. You could also buy them out of the locked LP, but I don’t think you’d want to do that. You should plan ahead and keep some tokens aside for an exchange listing.

  1. If we create additional LP pairs, will the clones of safemoon works? my understanding is they create a fixed LP pair with pancakeswap

As long as the initial LP is still going, then you are good to go. If the initial LP pair (the one attached to LIQ tax and swap and liquifiy) is removed, then it will stop working.

  1. Are you saying CEX doesn’t require new LP pairs?

A CEX creates its own pairs out of the assets it owns. It’s not actually “providing” liquidity anywhere. The liquidity is in their wallet(s). It’s all numbers on a screen when you do trades. For example Binance. When you buy/sell on Binance, there is no transfer of tokens. It’s just adding and removing through an account system. https://www.gemini.com/cryptopedia/centralized-exchanges-crypto#section-trading-on-a-centralized-exchange

Quick question here:

  1. Can you ever have “too much” liquidity? I noticed on one of my tokens people were doing huge buys but it seemed to have a minimal impact on the price. It concerned me because then I was thinking how is it going increase?

  2. A friend recommended that I remove some of the liquidity generated in the contract because of the previous reason and also to help pay for exchanges since people wanted to be listed on many exchanges but I received few donations to any. Is this something I should stop? If so how should I plan to get funds for exchanges without dumping all of my tokens?