How Much Liquidity Do You Actually Need? We Ran the Numbers
The most common question from founders planning a DEX launch is deceptively simple: how much liquidity is enough? The answer depends on what “enough” means for your traders.
We ran the Token Launch Simulator’s AMM engine at five budget levels ($5K, $10K, $25K, $50K, and $100K), all with a 70/30 liquidity split and 1 billion token supply. Here’s what the constant product formula produces.
The Slippage Table
This is the most important table in this article. It shows the price impact a trader experiences at four standard trade sizes, for each budget level:
| Budget | Liquidity (L) | $1K Trade | $5K Trade | $10K Trade | $50K Trade |
|---|---|---|---|---|---|
| $5,000 | $3,500 | 20.00% | 100.00% | 200.00% | 1,000.00% |
| $10,000 | $7,000 | 10.00% | 50.00% | 100.00% | 500.00% |
| $25,000 | $17,500 | 4.00% | 20.00% | 40.00% | 200.00% |
| $50,000 | $35,000 | 2.00% | 10.00% | 20.00% | 100.00% |
| $100,000 | $70,000 | 1.00% | 5.00% | 10.00% | 50.00% |
At $5K budget, a $1,000 trade already faces 20% price impact: the trader gets 20% fewer tokens than the spot price implied. At $100K, that same trade has just 1% impact.
The Pattern: Doubling the Budget Halves the Slippage
The relationship is precisely inverse. Every doubling of liquidity cuts price impact exactly in half for any given trade size. This isn’t approximate: it’s a mathematical property of the constant product formula (x * y = k).
This means the “right” budget depends entirely on the trade sizes you expect:
- If your community trades in $50-$500 range: $10K-$25K liquidity keeps impact manageable
- If you expect $1K-$5K trades: You need $50K+ in liquidity
- If you want to accommodate $10K+ trades: $100K+ is where it starts working
A Counterintuitive Finding: Same Ownership Across All Budgets
Every scenario at 70/30 split produces exactly 30.00% supply ownership and 104.08% price appreciation, regardless of budget. This is because the constant product AMM is scale-invariant: the percentage relationships are identical whether you’re working with $5K or $100K. The absolute numbers change, but the ratios don’t.
This means the split ratio (not the budget level) determines your ownership percentage. The budget level determines your liquidity, which determines trade quality. These are two independent decisions.
What Does “Enough” Look Like?
A common benchmark: under 2% price impact for a $1K trade. Looking at the table, that requires at least $50,000 in liquidity (from a ~$71K total budget at 70/30). For many independent launches, this is aspirational, which is why understanding the tradeoffs at lower budgets matters.
At $25K liquidity ($35,700 budget), a $1K trade has 4% impact. Not great, but workable for retail-scale trading. This is where many successful small-cap launches operate.
Try it yourself: adjust the budget in the Token Launch Simulator and watch the slippage table update in real time. The numbers above were generated by the same engine.
All numbers in this article were generated by running the Token Launch Simulator's AMM engine with the specified parameters. No data was fabricated or estimated. This content is for educational purposes only and does not constitute financial advice.