Key takeaways
Exit liquidity traps occur when new investors unknowingly provide liquidity for insiders to cash out, leaving them with devalued assets.
FOMO drives impulsive trades, often leading to costly mistakes and becoming exit liquidity for early movers.
Beware of projects with exaggerated claims, low liquidity, anonymous teams or sudden price surges.
Investing in high-market-cap coins, avoiding hype-driven projects and using reputable exchanges reduce the risk.
Are you concerned about having bought a cryptocurrency only to later realize that your investment facilitated someone else’s profitable exit? This scenario is called an exit liquidity trap, a deceptive market dynamic where unsuspecting traders provide liquidity for insiders or seasoned investors to offload their holdings at inflated prices.
By the time you recognize you have been trapped, the price crashes, leaving you with devalued tokens. But how do you spot these traps before it is too late?
This guide breaks down exit liquidity traps, their warning signs and strategies to