Congratulations!!! You finally hit your first 20x multiple and are sitting on a shit load of unrealized gains. You made it!!!
But unfortunately there is one little problem…all those juicy gains you made you cannot realize because the liquidity just isn’t there for you to be able to sell. It is also very early in the adoption cycle of your shit coin and because you have 0 idea how to sell you are going to miss a lot of the upside. At this stage you have two options:
Option 1: Sell OTC to a chad that knows what they are doing. I HIGHLY recommend you take this option if you can. Most likely you do not have the skill, emotional fortitude, or just general knowledge to be able to execute. Even if I lay out exactly what to do you probably fumble this miserably so if you can sell OTC at a discount DO IT!
Option 2: Follow the guidelines I lay out below. Highly suggest you avoid this option at all cost. Try to sell OTC, for the love of god just get some money out without completely fucking yourself.
So you feel brave, ready to level up your crypto game and have decided you want to try to sell yourself! “Shit I’m like really smart, I mean look how much money I made I totally know what I’m doing!” Alright well here’s some information that will help you extract as much value as possible.
How do Liquidity Pools Work?
In our example Tony (that’s you), just scored an insane multiple. He shoved 100k into a shit coin at the pico bottom and is now sitting on 5M+ of said shit coin. Tony needs to first understand how LP pools work.
A video on LP’s can be found below that will go into all the nitty gritty. For the purpose of selling we only need to know a few basic details which I’ll go into. If you want to fully understand outside the context of this article give it a watch.
For the purpose of this article we just need to know that each LP is comprised of 2 distinct assets. As people buy or sell into the pool one side of the asset increases while the other decreases. I’ll go ahead and give some examples what this looks like along with how its reflected on the chart.
The graphic below shows our shit coin (X) paired with USDC. The total value of this pool (or the depth of liquidity) is 100k. That means there is 50k of value of your shit coin and 50k USDC.
Now as stated earlier Tony (that’s you) has 5 million! How should he sell? A good example of WHAT NOT TO DO is found in the tweet below.
Because the pool only has 100k so 50k shit coin 50k USDC if you dumped the full 5 million the most you could get out is 50k USDC (because that’s all that’s in the pool). The difference between the 50k USDC you received and the 5 million you had in unrealized gains is called SLIPPAGE. You’ll soon come to realize that as you try to sell you are going to eat insane slippage until someone comes along and add’s to the LP.
Until then we have to rely on market participants to balance the pool in our favor. Well what does that mean? First you have to understand how these LP pools work.
Roger (that’s some other dumbass on CT who is your exit liquidity) has heard about how great this shit coin is and he wants in on the action. He come’s to the LP pool and decides he wants to trade 10k USDC for some shit coin. This means the LP pool now has 60K USDC instead of the 50k because he added dollars to extract shit coin. So as new market participants buy in with USDC the pool increases in USDC total and decreases in shit coin.
Now that the pool has more USDC we can sell into it without eating as much slippage. Should we dump it just because it moved to 60k? Absolutely not, this is just the intro example so you understand how LP’s work!
How is it reflected in the chart?
So this is where you can finally understand how LP's and price action work. It’s where you also understand why they say buy support and sell resistance. Because Roger (our low IQ exit liquidity) decided to buy he actually drove the price up! Thank you Roger for your blood sacrifice! So not only did we get more liquidity to sell into we also get to sell at a higher price! When you are early the only option is to sell into rips. Selling into a dip is just -EV all around. Not only will you eat more slippage (because people are coming into the LP trading shit coin for USDC so it balanced to have more shit coin than USDC) you will actually just fucking destroy the chart.
Now remember you are the alpha chad here. You are the whale now it is your responsibility to not destroy the chart. This means you may have to come over the top at resistance to support a key level. I actually witnessed this first hand on the Trader Joe trade. Some people were in that coin that had 0 right to be there. What happened? Well it went on a fucking tear and noobs decided they were going to just dump it instead of scaling out via a TWAP. So big players (who I will not name) realized there was a lot left in this and had to step up to defend it. If they didn’t who knows what would have happened.
How to sell?
Well there are a few ways to do this. First we want to sell on the way up. As discussed the LP has more USDC so you have less slippage. We also want to be mindful of the chart and not sell at resistance. Overall its just a stupid strategy as we get less money out and we kill all the momentum.
TWAP (Time Weighted Average Price): Basically don’t fucking nuke it. Sell small amounts every so often.
Be mindful of the chart, remember you hold most of the chips you are in control.
Step in to buy resistance if you have to. Understand how much is left in the trade and try to keep the momentum going.
Pay attention to the amount of liquidity in the pool. Understand that as price goes up people are putting dollars in so there is more for you to take. A good tool to use is https://dexscreener.com/. We can live track the buys and sells to see what action has taken place. We can see over all liqudity, what the recent buys and sells were and how much volume has gone through.
NEVER NEVER NEVER fully nuke the thing. You don’t want to have that reputation. Be known as someone that is mindful of others playing the same game as you. People tend to disagree with me on this but idc. I don’t want this reputation.
Awesome write up. Informative and fkn hilarious! Can't wait for the next one.