In today’s fast-paced world, having crucial insights into the intricacies of the crypto market can go a long way. Access to in-depth knowledge, understanding of market patterns, and the ability to interpret these patterns correctly can significantly affect investment outcomes. Diving into the depths of the crypto market, this article unravels the transformation of crypto market makers (MMs) over the years, detailing their practices, and casting light on their evolution, especially during and beyond the ICO boom. This vivid account not only offers a historic perspective of the working of MMs but also cautions future investors and traders about pitfalls.

The Evolution and Manipulative Practices of Crypto Market Makers

In the early stages of the 2017 ICO era, it was virtually impossible to raise funds without a deal with several MMs. The cost for such relationships, surprising as it may sound, reached around “$50k–$300k+” per month. Despite the steep prices, these arrangements were vital in drawing substantial investors and acquiring listings on reputed exchanges.

However, concern arises when some MMs resorted to dubious practices, resulting in their expulsion from high-ranking exchanges. Instances of devious MMs manipulating volumes on lower-tier exchanges by crossing orders with themselves were common—a strategy they were unable to apply on credible platforms such as Binance or Kraken.

The crypto market saw a significant shift when MMs adopted call option structures. Numerous MMs began to randomly increase token prices before exercising the calls and dumping everything. In contrast, reliable MMs aimed for narrow spreads and maintained a neutral delta. European calls, as per this analysis, were less susceptible to manipulation due to their exercise limitations, unlike their American counterparts.

The dawn of “low float meta” can be attributed to Sam Bankman-Fried (SBF), which saw MMs and funds exploit discounted tokens for exit liquidity. Fewer circulating tokens thus made it easier to manipulate price surges. Large block holders were found shorting the top on TGE, covered at the bottom, and then pumped it into low liquidity later, causing significant market disruption.

Referencing his past interactions with DWF Labs, it was revealed that Synthetix was the first project to be taken advantage of in this way. While such arrangements might benefit a project’s treasury in the short term, they often damage the token and community in the longer run.

A crucial takeaway from these observations is the urge for market participants to carefully scrutinise token transfers. Large volumes of tokens sent to a MM should raise alarm bells, as this might be a ploy for using you as exit liquidity. Greater transparency and skepticism are needed when dealing with sudden liquidity surges and backdoor deals.

Though times have changed since the days of the ICO boom, these revelations underline the persisting concerns over dubious MM practices. Both projects and investors should remain alert to these practices. At the time of press, the total crypto market cap was at $2.83 trillion.

What are the dangers of dubious Market Maker practices?

Unscrupulous Market Makers often resort to manipulative strategies like falsely inflating trading volumes or price manipulation, leading to artificial market movements. These deceptive practices can lead to undesired volatility, cause significant financial losses for traders, and lead to a loss of trust in the crypto market.

Why is it crucial to scrutinise large token transfers to Market Makers?

Large token transfers to Market Makers could be an indication of a planned exit strategy. This strategy involves the Market Maker selling a large number of tokens once the price increases, leading to a sudden drop in the token value. Therefore, such transfers should be scrutinised to prevent potential market manipulation.

How can investors protect themselves from deceptive Market Maker strategies?

Investors must stay informed about market trends and keep a vigilant eye on any suspicious activities. Using trusted platforms like Finances Zippy can provide real-time price predictions and expert-driven market trends. It is also essential to diversify investments and not rely wholly on a single token or coin.

These insights in the article are backed by meticulous research, and the content is carefully curated to maintain impartiality and accuracy. Our commitment to maintaining high sourcing standards is evident in each paragraph, thoroughly reviewed by our team of experts. This diligence ensures that our content maintains its integrity, relevance, and value to our readers.