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The Amihud Liquidity Measure helps answer a simple but powerful question: How much trading volume does it take to move the price of a token by 1%?
Rather than just looking at raw volume or price volatility, this metric combines the two to show how much impact trades are having on the market. The higher the number, the more liquid the token is, because it takes a larger dollar amount to push the price.
So if Bitcoin has an Amihud liquidity score of $45 million, it means you'd need roughly $45 million of trading volume to move its price by 1%. That tells us a lot about how deep the market is and how efficiently it absorbs large trades.
This measure gives a more grounded view of liquidity compared to just volume alone, which can be inflated or misleading.
Liquidity isn’t just about being able to buy or sell a token, it’s about being able to do it without significantly affecting the price. This matters to everyone, but especially to larger investors or protocols that move size.
Tokens with low liquidity are more volatile because even modest trades can shift the price. That kind of slippage can impact everything from market making to DeFi strategies to treasury management.
The Amihud Liquidity Measure shows whether high volume is effective at stabilising the market. If a token has high volume but still moves 1% on small trades, then something’s off, the market may be shallow, fragmented, or concentrated.
On the flip side, if a token can handle millions in volume without much price movement, that’s a strong sign of maturity and robustness.
If the Amihud Liquidity Measure is consistently high, it indicates that the token can absorb large trades with minimal price movement. This generally reflects deep order books, active participation, and robust market-making — signs of a mature and efficient market. For large investors or protocols that require predictable execution, this level of liquidity creates a solid foundation.
Lower Amihud values suggest thin or fragile liquidity. In such markets, even modest trades can trigger noticeable price shifts, increasing costs for users and volatility across DeFi applications. This might reflect low participation, fragmented liquidity, or a concentrated holder base.
A rising Amihud value over time could signal improving market stability and growing trust in the token’s tradability. It may also reflect better infrastructure, more efficient routing, or higher market-maker engagement. A declining value, on the other hand, might be an early sign of liquidity stress, possibly driven by capital outflows, reduced trading interest, or macro-level shifts in sentiment.
Amihud helps move beyond just “how much is traded” to show “how well the market can handle it.” For any protocol serious about scaling, sustaining usage, or attracting larger players, this measure gives a grounded view of how much pressure its token can realistically bear.
