Market makers, crypto’s silent predators

A recent study reveals that approximately 78% of initial exchange offerings (IEOs) of crypto tokens are manipulated by market makers. This practice raises serious questions about the integrity of the listing process and its implications for traders and cryptocurrency holders.

Price manipulation, a common practice

An in-depth analysis of 93 initial exchange offerings, or IEOs, since April 2024 highlights questionable wash trading and pump and dump practices.

According to the relative volatility variation (RCV) metric, 69.9% of quotes are classified as “parasitic” and 8.6% as “transient”. These malicious strategies significantly distort price discovery, harming token holders and compromising the tokenomics of projects.

In parasitic listings, market makers orchestrate artificial liquidity to inflate initial prices. This manipulation leads to a spectacular rise followed by a sharp fall, trapping many FOMO buyers who end up with devalued tokens.

Transient quotes, on the other hand, are characterized by a deliberately unbalanced order book, benefiting only market makers to the detriment of the token ecosystem and its community.

Towards strict regulation of crypto listing practices

Faced with these alarming warning signals, a profound overhaul of listing protocols is urgently needed. Exchanges and token issuers must demand total transparency from Market Makers. The systematic implementation of detection tools such as RCV would make it possible to identify and severely sanction market manipulation.

Actively promoting “symbiotic” approaches – which unfortunately only represent 21.5% of IEOs studied – is crucial for the future of the sector. These virtuous methods ensure fair price discovery and promote sustainable market engagement, benefiting the entire DeFi ecosystem.

The cryptocurrency industry urgently needs to restore trust by drastically improving the integrity of listings. Only concerted and determined action by all stakeholders will allow the construction of a fairer and more sustainable market. The credibility of the sector and the protection of all participants, from influential whales to vulnerable smallholders, depend on it.

In short, the crypto community is at a crossroads. It must choose between allowing these toxic practices to persist or working collectively for a more transparent and ethical ecosystem. The future of IEOs and investor confidence depend on it.

Fenelon L.

Passionate about Bitcoin, I like to explore the intricacies of blockchain and cryptos and I share my discoveries with the community. My dream is to live in a world where privacy and financial freedom are guaranteed for everyone, and I firmly believe that Bitcoin is the tool that can make this possible.

DISCLAIMER

The views, thoughts and opinions expressed in this article belong solely to the author and should not be considered investment advice. Do your own research before making an investment decision.