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Market Makers, silent predators of cryptocurrencies
10:45 ▪ 3 minute read ▪ by Fenelon L.
A recent study reveals that approximately 78% of crypto token initial exchange offerings (IEOs) are manipulated by market makers. This practice raises serious questions about the integrity of the listing process and its implications for traders and hodlers.
Price manipulation, a common practice
An in-depth analysis of 93 initial exchange offerings, or IEOs, from April 2024 highlights dubious wash trading and pump and dump practices.
According to metric of relative volatility variation (RCV), 69.9% of listings are classified as “parasitic” and 8.6% as “transient”. These harmful strategies significantly distort price discovery, thereby harming token holders and compromising the tokenomics of projects.
In parasitic quotes, Market Makers orchestrate artificial liquidity to inflate initial prices. This manipulation leads to a spectacular pump followed by a brutal dump, trapping many FOMO buyers who end up with devalued tokens.
Transient listings, on the other hand, are characterized by a deliberately unbalanced order book, which exclusively benefits market makers at the expense of the token ecosystem and its community.
Towards strict regulation of cryptocurrency listing practices
In the face of these alarming warning signs, a major overhaul of listing protocols is urgently needed. Exchanges and token issuers must demand complete transparency from Market Makers. The systematic implementation of detection tools such as RCV would allow market manipulation to be identified and severely sanctioned.
Actively promoting “symbiotic” approaches – which unfortunately only represent 21.5% of the 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 sector Trust needs to be urgently restored by dramatically improving quote integrity. Only concerted and determined action by all interested parties will allow the construction of a fairer and more sustainable market. The credibility of the sector and the protection of all participants depend on it, from influential whales to vulnerable small landowners.
In short, the cryptographic community is at a crossroads. It must choose between allowing these toxic practices to persist or working collectively towards a more transparent and ethical ecosystem. The future of IEOs and investor confidence depend on it.
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Fenelon L.
Passionate about Bitcoin, I like to explore the intricacies of blockchain and cryptocurrencies and share them with the community. My dream is to live in a world where privacy and financial freedom are guaranteed for everyone, and I have understood that Bitcoin is the tool that can make this possible.
DISCLAIMER
The views, thoughts and opinions expressed in this article are solely those of the author and should not be relied upon as investment advice. Do your research before making any investment decisions.