From Cointelegraph
April 16, 2025 12:02:00 PM:

Market makers play a crucial role in the success of cryptocurrency projects by providing liquidity and securing listings on major exchanges. However, some market makers are using controversial token loan structures to enrich themselves at the expense of the projects they support, leading to price manipulation and project struggles.

Popular market makers like DWF Labs and Wintermute have proposed loan option models as part of their services, which can harm a project’s liquidity and result in negative outcomes. Despite claims of commitment to ecosystem growth, concerns have been raised about their trading practices and the impact on token prices.

Projects that enter into loan option deals with market makers often end up worse off than when they started, facing price crashes and struggles to recover. While some projects benefit from these arrangements, poor structuring and lack of transparency can quickly turn loan option models predatory, leading to negative consequences for projects.

Despite the potential benefits of the loan option model for larger projects, poor structuring and lack of transparency can quickly turn these deals predatory. Projects that effectively manage their liquidity relationships can avoid negative outcomes, but the lack of balance and information in these deals can lead to price manipulation and project struggles. CEXs are being criticized for turning a blind eye to market manipulation, but not all exchanges are complicit. There is a push for a retainer model for market makers to prevent token dumps and predatory behavior. The industry is becoming more aware of risks tied to loan option models as token crashes raise red flags. Transparency and accountability are needed to address these issues.

Read more at Cointelegraph

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