Token sniping is a race for milliseconds. Bots instantly buy up assets, selling them at a profit while regular traders remain at a loss. Let's find out how it works and what risks are hidden behind this tactic
The launch of a new token on decentralized exchanges (DEX) is always a volatile event. In the first seconds after the start of trading, the price can rise thousands of times, attracting the attention of traders. However, behind this excitement are often automated strategies of large players, including token sniping - a tactic of instant buying followed by selling on a sharp rise. We analyze how it works and what impact it has on the market.
How DEXs work and why sniping is possible
Unlike classic crypto exchanges, where orders are executed through a book of orders, on DEX trading takes place through a pool of liquidity. Each trading pair is represented by a pool containing two assets. The price is formed by an automated market maker (AMM) algorithm, which redistributes the balance of assets in the pool depending on supply and demand.
When a new token is launched, liquidity in the pool is minimal, so even a small transaction can change the price dramatically. This creates conditions in which the first buyers can get the asset for pennies, and a short time later sell it hundreds of times more expensive. Such a mechanism makes sniping possible.
How sniping works: the mechanics of manipulation
Sniping is the instantaneous purchase of tokens in the first fraction of a second after the start of trading and then selling them at an inflated price. Snipers monitor the blockchain in advance looking for new trading pairs on DEX. Their bots analyze the token contract and wait for the moment when there is an opportunity to send a transaction. As soon as liquidity is added to the pool, the bot sends a command to buy tokens at the lowest price using a high priority on the blockchain.
In some cases, snipers themselves initiate a sharp rise in the rate by injecting large purchases of their own funds into the market to create the appearance of demand. Seeing the rapid growth of the asset, regular traders start buying en masse, supporting the price movement already organically. At this point, snipers sell their assets, locking in their profits, after which the rate usually drops precipitously.
Who uses sniping and why it's manipulation
Sniping tactics are used by both private traders and large funds that have the technical capabilities to execute trades instantly. Some teams of cryptoprojects themselves implement bots in advance to control a part of the token supply and direct the price movement in the desired direction. In other cases, snipers rent powerful nodes, gaining priority access to the blockchain.
While sniping does not formally violate DEX rules, it creates an uneven playing field for retail investors. The price at the start is artificially high, traders buy the token at the peak of growth, and after the mass exit of snipers, the value of the asset falls sharply, leading to losses.
How projects protect themselves from sniping
Some projects try to combat manipulation by implementing defense mechanisms. Common methods include anti-bot filters that limit the speed or volume of the first purchase. As well as delays on the execution of the first transactions to prevent ultra-fast buys. Some teams employ phased liquidity unlocking, which makes access to tokens more gradual. However, these measures are not always effective, as experienced snipers find ways around the restrictions, and sometimes the projects themselves use these tactics to their advantage.
But despite the opportunity to make millions quickly, sniping is a high-stakes game in which not everything ends in profit.
First, the liquidity of the token may not support the price, especially if other bots are running in parallel. If the assets can't be sold in time, the sniper will be left with useless tokens that no one will buy anymore.
Secondly, token developers can build in protection against bots. Some projects introduce mechanisms that limit the number of tokens available for purchase in the first seconds or block sniper transactions. In such a case, the sniper's money ends up frozen in an illiquid asset.
The third risk is errors in strategy. In December 2024, one trader decided to use sniping during the launch of the PENGU token. He received the contract address in advance and sent a token purchase order through the Jupiter aggregator, hoping to beat the market. However, the transaction hit the wrong, almost empty, liquidity pool on the Raydium platform. Due to the AMM algorithm, the price instantly skyrocketed and Sniper paid over $10,000 in SOL for 78 PENGU, which were worth about $5 when the transaction was finalized. This scenario can happen if the bot is misconfigured or the trader acts manually without checking the details of the transaction.
Another risk is the so-called rug pull. If the token was originally created as a scam token, the developers may suddenly remove the liquidity, leaving all holders with impaired assets. In this case, the sharpshooter will suffer if he or she doesn't get out first.
Finally, the risks associated with the law. In some jurisdictions, such manipulation may qualify as fraud or market manipulation. If the sniper works with large sums of money and is identified, he or she could face criminal charges.
Token sniping is not just a quick buy, but an elaborate price manipulation strategy that redistributes profits in favor of algorithmic traders. Ordinary market participants find themselves at a disadvantage, entering the asset already after the main movement. As long as decentralized exchanges remain open and transparent, it is impossible to completely exclude sniping. But understanding this mechanics helps to avoid traps and make more informed decisions when participating in early listings.
