Market makers can either propel or destroy cryptocurrency projects, depending on the structure of their deals. The loan option model, where projects lend tokens to market makers for liquidity and exchange listings, can lead to significant harm for fledgling projects. Market makers may dump these tokens, causing prices to plummet, after which they buy them back at discounted rates. Industry experts warn that many projects do not fully understand the risks of such agreements, which often lack clarity on performance metrics. While some market makers claim to bolster ecosystems, others have been criticized for predatory practices. Structures that work better for projects include the retainer model, where firms receive a flat fee for ongoing services instead of tokens. This arrangement allows for long-term partnerships and more aligned incentives. Critics note that this loan model is not illegal but often manipulative, as it exploits informational imbalances within the crypto space. Despite some cases of positive outcomes, the majority of projects engaging in such arrangements suffer falling token prices, indicating a trend of misuse.

Source đź”—