Someone recently asked me about the difference between the internal market and the external market. Let me briefly share my understanding.

First, what is the internal market? When a new token is first issued, the project team will set up a virtual liquidity pool themselves, preloading it with a bunch of sell orders. It sounds complicated, but basically, the project team is secretly creating counterparties for buying and selling. Buyers think they are trading with the market, but in reality, they are interacting with a virtual pool set up by the project team. The core purpose of the internal market is to sell the preset amount of tokens as quickly as possible.

To make it clearer, here’s an example. Before a new token launches on PancakeSwap, the project team injects virtual LP into a testnet or private pool, setting up a sell order for 100,000 tokens starting at a price of 0.01 BNB. Retail investors rush to buy, and this process is called “pumping the internal market.” Once the preset amount is sold out, it’s called “filling the internal market,” and only then does the project move the real liquidity to the mainnet.

It’s important to note that the risks of the internal market are quite high. Many developers, if sales in the internal market don’t meet expectations, will simply withdraw the pool and run away—that’s what’s called a Rug Pull. So participants in the internal market need to stay alert at all times.

What happens after the pool is filled? The project moves the real LP to the external market (usually PancakeSwap’s mainnet). At this point, the liquidity pool is truly open. Community users can freely provide liquidity, and the market enters a normal secondary trading phase. The external market is this stage—everyone can trade freely, no longer just interacting with the project’s virtual pool.

But be cautious here too. Some projects, after migrating to the external market, see whales or developers suddenly dump large amounts, causing the price to crash instantly. Quick reactions are necessary in such cases. Another risk is a liquidity trap—if the pool after migration is too shallow (say only a few thousand dollars), it can be easily manipulated by big players to control the price.

My advice is, if you want to participate in the internal market, always check the pool depth with tools like DexTools. If virtual LP accounts for more than 70%, the risk is quite high, and it’s better to stay on the sidelines. Also, beware of fake internal markets—some project teams use multiple accounts to do wash trading, creating false trading volume and selling pressure, just to generate FOMO and lure people in.

To sum up simply: the internal market is a virtual trading stage controlled by the project team, while the external market is the real open market. The internal market might offer bigger profit opportunities, but the risks are also greater. Choosing which stage to participate in depends on your risk tolerance.