Airdrops can significantly impact market price and liquidity. By distributing free tokens, airdrops increase the circulating supply, which may initially depress prices due to dilution if demand doesn’t rise proportionally. However, they can also boost liquidity by dispersing tokens to a broader audience, encouraging trading activity and market participation. Short-term price volatility often occurs as recipients sell off tokens for profit, especially if the airdrop lacks utility or long-term incentives. Conversely, well-designed airdrops tied to project engagement can enhance demand, stabilize prices, and deepen liquidity pools over time. The effect hinges on factors like token distribution scale, recipient behavior, and project credibility. Data from past airdrops, like Uniswap’s 2020 event, shows a liquidity surge but mixed price outcomes, reflecting these dynamics. Overall, airdrops are a double-edged sword for markets.