Market risk · updated
How to read a liquidity lock
The three numbers behind the phrase, and why the phrase alone tells you nothing.
In short
- Locked share and expiry date matter more than the word 'locked'.
- Depth decides your exit cost and is often far below the advertised market cap.
- An unrecognised locker reads as no data, which lowers confidence.
Three variables hidden in two words
'Liquidity is locked' can describe a lock over the whole pool for three years, or a lock over ten percent of it that expires next Tuesday. Both are accurately described by the phrase, and they are not remotely the same position.
The three variables are the locked share, the expiry date and the depth of the pool being locked. Get all three or you have not read the lock, you have read the marketing.
Depth first
Before the lock matters at all, the pool has to be worth locking. A pool of a few thousand dollars produces a convincing price chart and cannot absorb a real exit, and locking it changes nothing about that.
Compare depth against the market capitalisation being advertised. Market cap is price times supply, and price comes from the last trade in a pool that may be tiny. A large notional value on a small pool is extremely common and is exactly the gap worth noticing.
Read the date as a date
An unlock date is a specific day on which the position becomes withdrawable. Read it as a calendar date and ask what you expect to be true then.
Locks also cluster: several partial locks expiring within days of one another add up to an effective unlock, even though no single one covers much. Look at the schedule rather than the largest entry.
When there is nothing to read
Lock detection requires recognising the locker contract. Custom arrangements, unusual lockers and positions held directly by a wallet all produce no lock data, and that is reported as uncertainty — it lowers the confidence score and leaves the risk score alone.
Absent lock data is not evidence in either direction. It is the report saying it could not establish the fact, which is a different and more honest thing than a green tick or a red cross.