Sometimes when you go to make a swap within the Rainbow app, you might see several warning messages that mention liquidity:
- Insufficient Liquidity
- Low Liquidity
When you see a message like this, it means that there aren’t enough of the tokens you want available in a liquidity pool. In other words, no one on the market is willing to give you the token in exchange for what you are offering.
In this guide, we’ll break down what low liquidity means, what can be done to resolve it.
What is Low Liquidity when Swapping?
When swapping, slippage is the difference between the expected price of a transaction and the price when the transaction actually executes. The slippage percentage shows how much the price for a specific token has shifted.
Due to the shifting nature of crypto, the price of an asset can fluctuate often depending on trade volume and activity.
How to Resolve:
There’s not a clear way around this scenario except to wait and see if liquidity increases in the future.
It's also very possible that a token may never have liquidity if there isn't enough market demand and no one is willing to become a liquidity provider for it.
In order to acquire a cryptocurrency or token on a decentralized exchange (DEX), there has to be enough of that token available on the market. The number of tokens available is the amount of liquidity the token has. The more liquidity there is, the easier and safer it is to trade.