Shocking Revelation: Market Makers, Silent Predators in Crypto

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 hodlers.

Price manipulation, a common practice

A thorough analysis of 93 initial exchange offerings, or IEOs, since April 2024 highlights dubious practices of wash trading and pump and dump.

According to the metric of Relative Change in Volatility (RCV), 69.9% of listings are classified as “parasitic” and 8.6% as “transitory.” These malicious strategies significantly distort price discovery, thus harming token holders and compromising the tokenomics of the projects.

In parasitic listings, 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.

Transitory listings, on the other hand, are characterized by a deliberately imbalanced order book, benefiting solely the market makers at the expense of the token ecosystem and its community.

Towards strict regulation of crypto listing practices

In the face of these alarming red flags, a profound overhaul of listing protocols is urgently needed. Exchanges and token issuers must demand complete transparency from Market Makers. The systematic implementation of detection tools like the RCV would allow the identification and severe sanctioning of market manipulations.

Actively promoting “symbiotic” approaches – which unfortunately represent only 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 crypto industry must urgently restore confidence 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.