Consider this hypothetical scenario:

Let’s say I created an ERC20 token just for fun. I keep 1 billion of these tokens for myself.

I list this token on a small exchange. And then by some miracle the price of this token rises to $1. Is there any way I can get rid of all my tokens at this very moment and make a $1 billion profit - despite the obvious low liquidity of my custom token?

I’m asking this because I’m wondering how scammers can create large amounts of new coins/tokens and then dump them en masse despite low liquidity?

  • Those scammers expect scam'ees to buy their tokens in exchange for ether, then they convert the ether to dollars. The miracle you need it that others will buy your tokens in exchange for ether. – goodvibration May 29 at 15:13
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    The price on the exchange is usually (always?) the price of the last trade, which could be a very small quantity of tokens. Market forces all but assure that the price won't stay at $1 when a seller tries to dump 1B tokens. – Rob Hitchens May 29 at 19:52

They wont be able to sell them immediately. The "real" actual price of any token is how much someone is actually willing to pay for it. It might be "worth" $1B in that exchange's eyes but that only means that exchange values it at $1B.

No other third party has to buy it back from you at the $1B valuation.

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