{"id":23153,"date":"2025-04-17T18:25:40","date_gmt":"2025-04-17T15:25:40","guid":{"rendered":"https:\/\/forklog.com\/en\/market%e2%80%91making-deals-quietly-kill-crypto-projects\/"},"modified":"2025-04-17T18:25:40","modified_gmt":"2025-04-17T15:25:40","slug":"market%e2%80%91making-deals-quietly-kill-crypto-projects","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/market%e2%80%91making-deals-quietly-kill-crypto-projects\/","title":{"rendered":"Market\u2011making deals quietly \u2018kill\u2019 crypto projects"},"content":{"rendered":"<div class=\"wp-block-text-wrappers-keypoints article_keypoints\">\n<ul class=\"wp-block-list\">\n<li>Market makers can crash token prices, creating a \u201cdeath spiral\u201d for projects.<\/li>\n<li>Opaque deals between market participants foster abuse.<\/li>\n<li>Retainer models with fixed fees reduce risks and encourage long-term cooperation.<\/li>\n<\/ul>\n<\/div>\n<p>Given incentives that allow abuse, market makers, instead of securing a listing on <span data-descr=\"centralised platforms\" class=\"old_tooltip\">CEX<\/span> and providing liquidity, can trigger a \u201cdeath spiral\u201d for smaller crypto projects, reports<a href=\"https:\/\/cointelegraph.com\/news\/market-maker-deals-quietly-killing-crypto-projects\"> Cointelegraph<\/a>.<\/p>\n<p>The risk stems from the \u201ccredit option\u201d model, under which native tokens are handed to a market maker who then uses them to stimulate trading activity.<\/p>\n<p>In practice, some intermediaries may rely on an ambiguous lending structure that enriches them at the expense of the projects they are meant to support.<\/p>\n<p>Such deals, often pitched as low risk and high return, can tank an asset\u2019s price and force young teams into scrambling to stabilise it.<\/p>\n<p>Ariel Givner, founder of Givner Law, explained that under this scheme, if tokens fail to list on a CEX, market makers return them within a year\u2014at a higher price.<\/p>\n<p>It is not uncommon for intermediaries to dump borrowed coins and then buy them back at a discount, which becomes their profit.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em>\u201cI have not seen a single token that genuinely benefited from these market makers. I am sure there are ethical ones, but those I have dealt with simply destroy charts,\u201d<\/em> <em>\u2014<\/em> the expert lamented.<\/p>\n<\/blockquote>\n<h2 class=\"wp-block-heading\">How it works<\/h2>\n<p>A Cointelegraph review of contracts found that leading market makers, including Wintermute and DWF Labs, have used credit option structures as part of their business model.<\/p>\n<p>DWF Labs says it does not use the practice because it has enough balance sheet to sustain its operations. Industry figures and on-chain analysts remain sceptical.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em>\u201cWe do not weaken the ecosystems we invest in,\u201d<\/em> <em>\u2014<\/em> said DWF Labs managing partner Andrey Grachev.<\/p>\n<\/blockquote>\n<p>Wintermute did not respond to a request for comment. Earlier, CEO Evgeny Gaevoy stated plainly in a series of posts that the firm is \u201cin the business of making money by trading\u201d and is not a charity.<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">3) Furthermore to make things clear \u2013 we are not a charity (or foundation?). Very much far from it, Wintermute (like any other prop trading firm) is in business of making money by trading. More specifically, our core business is trading digital assets. As such, we are very much\u2026<\/p>\n<p>\u2014 wishful_cynic (@EvgenyGaevoy) <a href=\"https:\/\/twitter.com\/EvgenyGaevoy\/status\/1886254968954319289?ref_src=twsrc%5Etfw\">February 3, 2025<\/a><\/p><\/blockquote>\n<p> <script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>According to Jelle Butu, co-founder of market maker Enflux, many teams do not fully grasp the pitfalls of the credit option model.<\/p>\n<p>Before signing, he advised, teams should assess whether lending out their tokens will deliver quality liquidity against clear metrics. Those metrics are often missing or described vaguely, Butu explained.<\/p>\n<p>The outlet analysed six such agreements, including those involving multiple market makers, and recorded token price declines.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"776\" src=\"https:\/\/u1f987.com\/wp-content\/uploads\/1-1522-1024x776.png\" alt=\"1-1522\" class=\"wp-image-256917\" srcset=\"https:\/\/u1f987.com\/wp-content\/uploads\/1-1522-1024x776.png 1024w, https:\/\/u1f987.com\/wp-content\/uploads\/1-1522-300x227.png 300w, https:\/\/u1f987.com\/wp-content\/uploads\/1-1522-768x582.png 768w, https:\/\/u1f987.com\/wp-content\/uploads\/1-1522.png 1066w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption class=\"wp-element-caption\">Data: Cointelegraph, CoinGecko.<\/figcaption><\/figure>\n<p>Kristiyan Slavov, co-founder of the Web3 accelerator Delta3, agreed with these conclusions.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em>\u201cWe have interacted with projects that ended up in deep shit after working under the credit option model. [\u2026] They hand over tokens, and then they are dumped. That is roughly how it goes,\u201d<\/em> <em>\u2014<\/em> he said.<\/p>\n<\/blockquote>\n<h2 class=\"wp-block-heading\">It is not all bad<\/h2>\n<p>Butu says the model is not inherently harmful if structured properly.<\/p>\n<p>An expert on listings, who requested anonymity, agreed with the Enflux co-founder.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em>\u201cI saw a project that had up to 11 market makers \u2014 about half used the credit model, the rest were smaller firms. The token did not fall because the team knew how to manage price and balance risks across several partners,\u201d<\/em> \u2014 he explained.<\/p>\n<\/blockquote>\n<p>The adviser likened the model to a bank loan. Institutions offer different terms, he noted, but none will bankroll a clearly shaky project. In crypto, the balance of power often favours those with more information.<\/p>\n<p>Earlier, the founder of DeFiance Capital under the moniker Arthur_0x <a href=\"https:\/\/u1f987.com\/en\/news\/collusion-between-crypto-projects-and-market-makers-poses-industry-challenges\"> noted <\/a> the lack of transparency in relationships between project teams and market makers, undermining confidence in the altcoin market. He accused centralised exchanges of turning a blind eye.<\/p>\n<p>The listing expert, for his part, said not all CEXs behave this way. Some flag unethical conduct and freeze an account while investigating, he added.<\/p>\n<h2 class=\"wp-block-heading\">Market makers\u2019 incentives<\/h2>\n<p>Some of Cointelegraph\u2019s sources advocate a retainer model: the project pays a market maker a fixed monthly fee in exchange for clearly defined services. Such agreements carry less risk, though they cost more in the short term, they said.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u201cIn such a scheme, market makers have an incentive to work with projects in the long term,\u201d added Slavov. <\/p>\n<\/blockquote>\n<p>The industry is increasingly aware of the risks tied to credit option models, especially as sudden token collapses set off alarm bells more often.<\/p>\n<p>In a now-deleted post, the X account Onchain Bureau claimed that the recent<a href=\"https:\/\/u1f987.com\/en\/news\/mantra-token-plummets-90-amid-allegations-of-reckless-liquidations\"> 90% plunge in Mantra\u2019s OM <\/a> was due to the expiry of a similar agreement with FalconX. Project representatives denied this, saying the firm is a trading partner, not a market maker.<\/p>\n<p>The outlet noted that this case highlights a growing trend \u2014 often with good reason \u2014 to blame credit option structures for token collapses.<\/p>\n<p>In a market where deal terms are hidden behind <a href=\"https:\/\/ru.wikipedia.org\/wiki\/%D0%A1%D0%BE%D0%B3%D0%BB%D0%B0%D1%88%D0%B5%D0%BD%D0%B8%D0%B5_%D0%BE_%D0%BD%D0%B5%D1%80%D0%B0%D0%B7%D0%B3%D0%BB%D0%B0%D1%88%D0%B5%D0%BD%D0%B8%D0%B8\" title=\"\">NDA<\/a>s and roles such as \u201cmarket maker\u201d or \u201ctrading partner\u201d are fluid, public suspicion is unsurprising, Cointelegraph added.<\/p>\n<p>Until transparency and accountability improve, the credit option model will remain one of crypto\u2019s least understood \u2014 and most abused \u2014 deal types, the publication concluded.<\/p>\n<p>Earlier, experts <a href=\"https:\/\/u1f987.com\/en\/news\/insider-collusion-blamed-for-mantra-token-crash\"> called <\/a> insider manipulation the reason for OM\u2019s recent 90% crash.<\/p>\n<p>Earlier, the Movement Network team <a href=\"https:\/\/u1f987.com\/en\/news\/movement-network-probes-market-maker-anomaly\"> launched an investigation <\/a> after Binance ended co-operation with an unnamed market maker over manipulation of MOVE\u2019s price.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Market makers can crash token prices, creating a \u201cdeath spiral\u201d for projects. Opaque deals between market participants foster abuse. Retainer models with fixed fees reduce risks and encourage long-term cooperation. Given incentives that allow abuse, market makers, instead of securing a listing on CEX and providing liquidity, can trigger a \u201cdeath spiral\u201d for smaller crypto [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":23152,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"","news_style_id":"","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[3],"tags":[20,1166,1286,1150,596],"class_list":["post-23153","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-and-analysis","tag-altcoins","tag-centralized-exchanges-cex","tag-listing","tag-news-plus","tag-tokens"],"aioseo_notices":[],"amp_enabled":true,"views":"72","promo_type":"","layout_type":"","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/23153","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/comments?post=23153"}],"version-history":[{"count":0,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/23153\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media\/23152"}],"wp:attachment":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media?parent=23153"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/categories?post=23153"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/tags?post=23153"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}