The Dark Side of Crypto Market Makers: Alleged Manipulation Tactics Exposed
Kain Warwick, the co-founder of the decentralized derivatives platform Synthetix, has shed light on what he describes as the deceptive tactics employed by market makers (MMs) to manipulate cryptocurrency prices.
In a detailed post on X, Warwick explained the evolution of these entities, from their initial role in facilitating exchange listings to orchestrating intricate price schemes that often leave retail investors holding devalued assets as exit liquidity.
During the initial coin offering (ICO) boom, Warwick noted that projects were typically required to pay market makers substantial fees, ranging from $50,000 to $300,000 per month, to secure listings on cryptocurrency exchanges and attract significant investors. He pointed out that without these often costly deals, it was nearly impossible for emerging projects to secure the necessary capital and exchange listings.
However, Warwick highlighted that as early as 2017, some market makers began to shift their focus towards more manipulative tactics.
Instead of prioritizing genuine liquidity provision, these MMs allegedly started artificially inflating trading volumes on smaller, lesser-known exchanges while strategically avoiding scrutiny on major platforms like Binance and Kraken.
Warwick outlined how market makers began using call option structures to profit from price manipulation.
Rather than providing genuine liquidity to the market, these MMs would allegedly engage in tactics to artificially pump up the prices of tokens. Once the price reached a certain level, they would exercise their call options and then quickly dump their holdings onto the market for profit.
Related: Senator Warren Questions Trump Administration Over Crypto Policy Conflicts, Market Manipulation Accusations
The low float strategy, which involves launching a token with a limited number of coins initially available for trading, and which gained popularity through figures like Sam Bankman-Fried, further amplified the value and effectiveness of these manipulative call option schemes.
With fewer tokens in circulation at the time of launch, market makers could exert more control over the price action.
They would allegedly sell into market bids to create artificial buying pressure, short the token to further drive down the price, and then buy back their positions at lower prices, ensuring maximum profits from these orchestrated price swings.
According to Warwick, projects now sell discounted tokens to liquidity funds before their Token Generation Event (TGE).
These funds then agree to strategically bid on the market, creating a false impression of strong demand for the token.
Simultaneously, a large portion of tokens is sent to exit-strategy MMs, who then proceed to dump these tokens into the artificially inflated market.
Related: Justin Sun Accuses Coin.com of Market Manipulation, Gets Accused Back
This cycle enables MMs and early investors to exit with profits while leaving retail buyers holding devalued tokens. Warwick cautioned that large token transfers to market makers should be viewed as a red flag, potentially indicating such manipulative schemes are underway.
Warwick criticized these tactics, emphasizing that a legitimate market maker should focus on providing liquidity with tight bid-ask spreads rather than manipulating prices. He urged investors to demand greater transparency from projects engaging with MMs.
He also revealed that Synthetix was among the first projects to be exploited by DWF Labs.
Warwick stated that DWF Labs purportedly purchased treasury tokens from Synthetix, artificially pumped the price in a low-liquidity environment, and then proceeded to dump their holdings for profit, leaving Synthetix and its community with the consequences.
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Cryptonews Official
2025/03/22 02:35
Coinbase in ‘advanced’ talks to acquire Deribit: report
Coinbase is reportedly in advanced discussions to acquire Deribit, a leading crypto derivatives exchange specializing in Bitcoin and Ether options, according to Bloomberg.
The companies have informed regulators in Dubai— where Deribit is licensed — about the ongoing negotiations, though no final agreement has been confirmed.
Deribit is the dominant player in the crypto options market and was valued between $4 billion and $5 billion earlier this year. The platform saw nearly $1.2 trillion in trading volume in 2024, nearly doubling its activity from the previous year.
Coinbase, primarily known for its spot trading business, would significantly strengthen its foothold in the derivatives space with this acquisition, aligning with its broader expansion strategy.
The potential acquisition follows earlier reports that Kraken had also explored a bid for Deribit. Coinbase has been increasingly focused on growing its derivatives offerings, having already launched derivatives trading for U.S. retail users and obtained a license to offer crypto futures.
With the derivatives market now accounting for a major share of crypto trading volumes, securing a platform like Deribit could give Coinbase a strong competitive advantage in the sector.
While the negotiations have reached an advanced stage, Bloomberg reported that it remains unclear if the two firms will finalize a deal.