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Lesson 1 of 5

What actually happens when you buy

Bonding curves, liquidity pools, and how people end up holding coins they can't sell.

You're not buying from a person

When you buy a memecoin you almost never trade with another human directly. You trade with a pool of money that a program holds. You put SOL in, the program gives you tokens out, and the price moves because of your trade.

That's why the price you see on the screen is only a starting point. The bigger your trade compared with the money in the pool, the worse the price you actually get.

Stage one: the bonding curve

Most pump.fun coins start life on a bonding curve. It's a formula, not an order book: every buy makes the next token a little more expensive, and every sell makes it a little cheaper. There's no one on the other side who has to agree to your price.

The upside is that you can always sell back to the curve. The catch is that the curve only holds the SOL that buyers put in. If most early buyers sell, the price drops fast, and so does what your tokens are worth.

On the curve, pump.fun charges a fee on every buy and every sell (1.25% at the time of writing, per pump.fun's own fee page). You pay it going in and again coming out.

Stage two: graduating to a DEX

If enough people buy, the coin 'graduates'. Its liquidity moves off the curve into a normal trading pool on a decentralised exchange (for pump.fun coins, usually PumpSwap). From then on the price is set by that pool, and fees follow the pool's rules.

Graduation is a big moment for traders, and snipers know it. Price often spikes and then falls as early holders take profit into the new buyers.

How people end up stuck

Thin pools: when a pool holds very little money, selling even a small bag moves the price hard against you. You 'can' sell, just at a terrible price.

Freeze authority: if the creator kept the power to freeze token accounts, they can stop your wallet from selling at all. Always check that it's revoked.

Mint authority: if the creator can still print tokens, they can create millions more and sell them, crushing the price. Also check that it's revoked.

Pulled liquidity: on some pools, whoever added the liquidity can take it back out. If a coin is on a normal DEX pool, check whether the liquidity is locked or burned.

Check it yourself

Works in pump.fun, Axiom, Photon, GMGN, BullX or whatever app you use. Layouts differ, so look for the same idea.

  1. Open any coin in the app you trade on (pump.fun, Axiom, Photon, GMGN, BullX or similar).
  2. Find where it's trading: most apps show a progress bar or a 'bonding curve' percentage while it's still on the curve, and a DEX or pool name once it has graduated.
  3. Look for the token's authorities. Many apps show 'Mint: revoked' and 'Freeze: revoked' in a security or audit panel. On Solscan they're on the token page.
  4. Note how much liquidity the pool has, then ask: if I bought $100, what fraction of the pool is that?
  5. Paste the same coin into the Trench Academy scanner and compare what it says.

Remember

  • You trade against a pool, and your own trade moves the price.
  • On the curve you pay a fee on the way in and again on the way out.
  • Mint and freeze authority should both be revoked. If either isn't, that's a serious warning.
  • Thin liquidity means you can technically sell, just not at the price you expected.

Quiz

5 questions, pass with 4. Every attempt draws a new set.

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