Two of the 12 months’s most chaotic token blowups — Motion Labs’ MOVE scandal and the collapse of Mantra’s OM — are sending shockwaves by means of crypto’s market-making companies.
In each instances, speedy worth crashes revealed hidden actors, questionable token unlocks, and alleged facet agreements that blinded market individuals, with OM falling greater than 90% inside hours late April on no obvious catalyst.
In contrast to conventional finance, the place market makers present orderly bid-ask spreads on regulated venues, crypto market makers usually function extra like high-stakes buying and selling desks.
They are not simply quoting costs; they’re negotiating pre-launch token allocations, accepting lockups, structuring liquidity for centralized exchanges, and generally taking fairness or advisory stakes.
The result’s a murky area the place liquidity provision is entangled with non-public offers, tokenomics, and sometimes, insider politics.
A CoinDesk exposé in late April confirmed how some Motion Labs executives colluded with their very own market maker to dump $38 million price of MOVE within the open market.
Now, some corporations are questioning whether or not they’ve been too informal in trusting counterparties. How do you hedge a place when token unlock schedules are opaque? What occurs when handshake offers quietly override DAO proposals?
“Our strategy now contains extra intensive preliminary discussions and academic periods with venture groups to make sure they completely perceive market-making mechanics,” Hong Kong-based Metalpha’s market-making division advised CoinDesk in an interview.
“Our deal constructions have developed to emphasise long-term strategic alignment over short-term efficiency metrics, incorporating particular safeguards in opposition to unethical habits akin to extreme token dumping and synthetic buying and selling quantity,” it stated.
Behind the scenes, conversations are intensifying. Deal phrases are being scrutinized extra fastidiously. Some liquidity desks are reevaluating how they underwrite token threat.
Others are demanding stricter transparency — or strolling away from murky initiatives altogether.
“Initiatives not settle for prestigious reputations at face worth, having witnessed how even established gamers can exploit shadow allocations or have interaction in detrimental token promoting practices,” Metalpha’s head of Web3 ecosystem Max Solar famous. “The period of presumptive belief has concluded,” he claimed.
Beneath the polished floor of token launch bulletins and market-making agreements lies one other layer of crypto finance — the secondary OTC market, the place locked tokens quietly change fingers effectively earlier than vesting cliffs hit the general public eye.
These under-the-table offers, usually struck between early backers, funds, and syndicates, at the moment are distorting provide dynamics and skewing worth discovery, some merchants say. And for market makers tasked with offering orderly liquidity, they’re turning into an more and more opaque and harmful variable.
“The secondary OTC market has modified the dynamics of the business,” stated Min Jung, analyst at Presto Analysis, which runs a market-making unit. “In case you have a look at tokens with suspicious worth motion — like $LAYER, $OM, $MOVE, and others — they’re usually those most actively traded on the secondary OTC market.”
“Your complete provide and vesting schedule has turn out to be distorted due to these off-market offers, and for liquid funds, the actual problem is determining when provide is definitely unlocking,” Jung added.
In a market the place worth is fiction and provide is negotiated in again rooms, the actual threat isn’t volatility for merchants — it’s believing the float is what the whitepaper and founders say it’s.
Learn extra: Motion Labs Secretly Promised Advisers Hundreds of thousands in Tokens, Leaked Paperwork Present
