Fartbucks price

Source: Crypto Pump & Dumps Have Become the Ugly Norm. Can They Be Stopped? Organized & compiled: lenaxin, ChainCatcher This article is compiled from an interview on the Unchained blog, featuring José Macedo, founder of Delphi Labs, Omar Shakeeb, co-founder of SecondLane, and Taran Sabharwal, CEO of STIX, who discussed topics such as liquidity shortages, market manipulation, inflated valuations, opaque lock-up mechanisms, and how the industry self-regulates in the crypto market. ChianCatcher organises and compiles the content. TL; DR The core function of market makers is to provide liquidity to tokens and reduce transaction slippage. Options incentives in the crypto market may induce "pump-and-dump" behaviour. It is recommended to adopt a fixed fee model to reduce the risk of manipulation. The crypto market can refer to the regulatory rules of traditional finance, but it needs to adapt to the decentralised nature. Exchange regulation and industry self-discipline are key entry points to promote transparency. The project party manipulated the market by falsely reporting circulation and passing on selling pressure from over-the-counter transactions. Reduce project financing valuations to avoid retail investors taking over high-bubble assets. The lock-up mechanism is opaque, and early investors are forced to liquidate informally, triggering a stampede: dYdX plummets. VC and founder interests are misaligned, and token unlocking is disconnected from ecological development. The real liquidity, lock-up terms, and market maker dynamics are disclosed on the chain. Allow reasonable liquidity release and hierarchical capital cooperation. Refinance after verifying product demand to avoid VC hotspot misleading. (1) Functions and manipulation risks of market makers Laura Shin: Let's first dive into the role of market makers in the crypto market. What core problems do they solve for the project party and the market? At the same time, what are the potential manipulation risks of the current market mechanism? José Macedo: The core function of a market maker is to provide liquidity across multiple trading venues to ensure that the market has sufficient buying and selling depth. Its profit model mainly relies on bid-ask spreads. Unlike traditional financial markets, in the cryptocurrency market, market makers often acquire a large number of tokens through options protocols, thereby occupying a large proportion of the circulating supply, which gives them the potential to manipulate prices. Such options agreements typically contain the following elements: The strike price is typically based on the previous funding price or a 25%-50% premium to the 7-day weighted average price (TWAP) after issuance. When the market price touches the strike price, the market maker has the right to exercise the option and make a profit. This protocol structure incentivises market makers to artificially drive up prices to some extent. Although mainstream market makers are generally more cautious, non-standard options agreements do carry potential risks. We recommend that the project team adopt a "fixed fee" model, where a fixed monthly fee is paid to hire market makers and require them to maintain reasonable bid-ask spreads and sustained market depth, rather than driving prices through complex incentive structures. In short, fees should be independent of token price performance; Cooperation should be service-oriented; Avoid distorting goals due to incentive mechanisms. Taran Sabharwal: The core value of market makers is to reduce trading slippage. For example, I once made a seven-figure trade on Solana that generated 22% on-chain slippage, and professional market makers were able to significantly optimise this metric. Given the cost savings for all traders for their services, market makers deserve to be paid accordingly. When choosing a market maker, project parties need to clarify incentive goals. Under the basic service model, market makers mainly provide liquidity and lending services; In the short-term consultation mode, short-term incentives are set around key nodes such as mainnet launches, such as stabilising prices through the TWAP trigger mechanism. However, if the strike price is set too high, market makers may execute option arbitrage and sell tokens on a large scale once the price far exceeds expectations, exacerbating market volatility. Lessons learned show that we should avoid setting excessively high strike prices and give preference to the basic service model to control the uncertainty caused by complex protocols. Omar Shakeeb: There are two core problems with the current market-making mechanism. First of all, there is a misalignment in the incentive mechanism. Market makers tend to focus more on arbitrage opportunities from rising prices than on their basic duties of providing liquidity. They should have been attracting retail traders to trade by continuously providing liquidity, rather than simply betting on price fluctuations to gain arbitrage gains. Second, there is a serious lack of transparency. Project parties usually employ multiple market makers at the same time, but these institutions operate independently of each other and lack a synergy mechanism. Currently, only project foundations and exchanges have a specific list of market maker cooperation, while secondary market participants have no access to relevant information about trade executors. This opacity makes it difficult to hold responsible parties accountable when abnormal situations occur in the market. (2) Movement turmoil: the truth about private equity, market making, and transparency Laura Shin: Has your company been involved in Movement? Omar Shakeeb: Our company did have a presence in Movement, but only in private markets. Our business processes are extremely rigorous and we maintain close communication with the project founders, including Taran. We rigorously investigate and review the backgrounds of each investor, consultant, and other participants. However, we do not know the pricing and specific operations involved in the market-making process. Relevant documents are only held internally by the project foundation and market makers, and are not disclosed to other parties. Laura Shin: So, did your company work as a market maker during the project's token generation event (TGE)? However, I think the agreement between your company and the foundation should be very different from the market maker's agreement, right? Omar Shakeeb: No, we are not involved in the market making business. We are in the private markets business, which is a completely different area than the market making business. A private market is essentially an over-the-counter (OTC) transaction that typically occurs before and after the TGE. José Macedo: Is Rushi selling tokens through OTC trading? Omar Shakeeb: As far as I know, Rushi did not sell tokens through OTC trading. The foundation has made it clear that it will not conduct a sell-off, but how to verify this commitment remains a difficult task. Market maker trading also carries this risk. Even if a market maker completes a large transaction, it may only sell tokens on behalf of the project team, and the outside world cannot know the specifics. This is exactly what the lack of transparency is about. I recommend clearly labelling wallets from the initial stage of token distribution, such as labelling "Foundation Wallet", "CEO Wallet", "Co-Founder Wallet", etc. In this way, the source of each transaction can be traced, making it clear what the actual sell-off is for all parties. José Macedo: We did consider flagging wallets, but this measure could raise issues such as privacy breaches and raising the bar for entrepreneurship. (3) Exchange and industry self-discipline: the feasibility of regulatory implementation José Macedo: As Hester Pierce emphasised in his recent proposal for safe harbour rules, project parties should disclose their market-making arrangements. Currently, exchanges tend to maintain low liquidity to achieve high valuations, while market makers rely on poor information to obtain high fees. We can draw from the regulatory experience of traditional finance (TradFi). The Securities and Exchange Act of the 1930s and the market manipulation of the 70s and 80s of the 20th century, such as inducing retail investors to take over by inflating trading volume, as revealed by Edwin Lefebvre in his Memoirs of a Stock Master, are similar to some phenomena in the current cryptocurrency market. Therefore, we recommend introducing these established regulatory regimes into the cryptocurrency space to effectively curb price manipulation. Specific measures include: It is prohibited to manipulate market prices by means of false pending orders, preemptive trading, and preferential execution. Ensure transparency and fairness in price discovery mechanisms, preventing any actions that could distort price signals. Laura Shin: There are many challenges in achieving transparency between issuers and market makers. As Evgeny Gavoy pointed out on The Chop Block, there is a general lack of transparency in market-making mechanisms in Asian markets, and achieving global unified regulation is nearly impossible. So, how can these obstacles be overcome? Is it possible to drive change through industry self-discipline? Is it possible to form a hybrid model of "global convention + regional implementation" in the short term? Omar Shakeeb: The biggest problem is the extremely opaque workings at the bottom of the market. If the leading market makers can spontaneously establish an open source information disclosure mechanism, this will significantly improve the current market situation. Laura Shin: But does this lead to the phenomenon of "bad money driving out good money"? Violators may avoid compliance agencies, so how can this bad behaviour be truly curbed? José Macedo: At the regulatory level, transparency can be promoted with the help of exchange review mechanisms. Specific measures include: requiring exchanges to publish a list of market makers and establishing a "compliance whitelist" system. In addition, industry self-discipline is equally important. For example, the audit mechanism is a typical case. Although not required by law, it is almost impossible to get investment for projects that are not audited today. Similarly, similar standards can be established for market maker qualification review. If a project is found to be using non-compliant market makers, its reputation will be damaged. Just as auditors have advantages and disadvantages, the reputation system of market makers also needs to be established. Regulatory implementation is feasible, and centralised exchanges are the key entry point. These exchanges generally want to serve US users, and US law has extensive jurisdiction over crypto businesses. Therefore, regardless of whether you are in the United States or not, as long as you use an exchange in the United States, you need to comply with relevant regulations. To sum up, exchange supervision and industry self-discipline can be important means to effectively regulate market behaviour. Laura Shin: You mentioned that market maker information should be made public and that compliant market makers should be recognised by the market. However, if someone deliberately selects a non-compliant market maker and such an institution itself lacks the incentive to publicly disclose the partnership, it may happen that the project party ostensibly uses a compliant market maker to maintain its reputation, but in fact entrusts an opaque institution to do so. The key questions are: How to ensure that the project party fully discloses all the market makers it works with? For market makers who do not take the initiative to disclose information, how can the outside world find out about their illegal operations? José Macedo: If an exchange is found to be using a non-whitelisted institution in violation of regulations, it is equivalent to fraud. Although project parties can theoretically cooperate with multiple market makers, in practice, due to the limited circulation of most projects, there are usually only 1-2 core market makers, so it is difficult to hide the real partners. Taran Sabharwal: This should be analysed from the perspective of market makers. First of all, it is one-sided to simply divide market makers into "compliant" and "non-compliant". How can an unregulated exchange be required to ensure the compliance of its trading entity? The top three exchanges (Binance, OKEx, and Bybit) are all offshore and unregulated institutions, while Upbit focuses on spot trading in the Korean market. Regulation faces many challenges, including geographical differences, head monopolies, and high entry barriers. In terms of the division of responsibilities, the project founder should bear the main responsibility for his manipulative behaviour. Although the censorship mechanism of exchanges is already quite strict, it is still difficult to eliminate circumvention operations. In the case of Movement, the problem is inherently social missteps, such as over-commitment and improper transfer of control, rather than technical flaws. Although its token market cap has dropped from 14 billion FTB to 2 billion, there are quite a few new projects following suit. However, the team's structural errors, particularly the improper transfer of control, ultimately led to the project being zeroed. Laura Shin: How should all parties work together to solve the many problems that are currently exposed? José Macedo: Disclosure of true circulation is key. Many projects inflate valuations by falsely stating circulating volume, but in reality, a large number of tokens are still locked up. However, tokens held by foundations and labs are usually not subject to lock-up periods, meaning they can sell them through market makers on the token's first day of launch. This operation is essentially a "soft exit" method: the team cashes out when the market is at its highest on the launch day, and then uses the funds to buy back unlocked team tokens a year later, or to use it to short-term increase the protocol's TVL before withdrawing funds. In terms of token distribution mechanisms, cost-based unlocking mechanisms should be introduced, such as those of platforms like Legion or Echo. Currently, channels such as Binance Launchpool have obvious flaws, making it difficult to distinguish between real user funds and platform self-held funds in multi-billion dollar pools. Therefore, it is urgent to establish a more transparent public offering mechanism. Transparency in the market-making process and ensuring that retail investors have a clear understanding of the actual holdings of tokens are also crucial. While most projects have made progress in terms of transparency, further improvements are needed. To this end, it is essential to disclose the details of the market maker's token lending agreement, including key information such as the amount borrowed, option agreement, and its strike price, in order to provide retail investors with more comprehensive market insights and help them make more informed investment decisions. In general, disclosing the true circulation, standardising the disclosure of market-making agreements, and improving the token distribution mechanism are the most urgent reform directions at present. Omar Shakeeb: The first issue is to adjust the financing valuation system. The current project valuation is inflated, generally $30-5 billion, which is beyond the affordability of retail investors. In the case of Movement, its token fell from a valuation of 14 billion to 2 billion, an exorbitant initial valuation that did not benefit either party. It should return to the early valuation level of Solana ($3-400 million) to allow more users to participate at a reasonable price, which is also more conducive to the healthy development of the ecosystem. Regarding the use of ecosystem funds, we have observed that project parties often fall into operational difficulties, and are they handed over to market makers? Trading OTC? Or something else? We always recommend over-the-counter (OTC) transactions, which ensure that the recipient of funds is aligned with the project's strategic objectives. Celestia is a typical case, which raised more than $100 million at a valuation of 3 billion after the token launch, but achieved effective allocation of funds through reasonable planning. (4) The truth of market manipulation Laura Shin: Is the essence of the current market regulation measures to gradually guide artificially manipulated token activities, such as market maker intervention, to a development trajectory that is in line with the laws of the natural market? Can this transformation achieve a win-win situation for all parties, safeguarding the interests of early investors and ensuring the sustainable development of the project team? José Macedo: The structural contradiction facing the market today is the imbalance of the valuation system. In the last bull market, due to the scarcity of projects, the market showed a general rise; In this cycle, due to the overinvestment of venture capital (VC), there has been a serious surplus of infrastructure tokens, causing most funds to fall into a loss cycle and have to sell their positions to raise new funds. This imbalance between supply and demand directly changes market behaviour patterns. The buyer's funds are fragmented, and the holding period is shortened from years to months or even weeks. The OTC market has fully shifted to hedging strategies, with investors staying market-neutral through options instruments, bidding farewell to the naked long strategy in the previous cycle. Project parties must face up to this shift: the success of Solana and AVAX is built on industry gaps, while new projects need to adopt small circulation strategies (such as Ondo controlling actual circulation below 2%) and maintain price stability through over-the-counter agreements with large holders such as Columbia University. Projects such as Sui and Mantra, which have performed well in this round, have verified the validity of this path, and Movement's attempt to stimulate price through tokenomics design without a mainnet has proven to be a major strategic blunder. Laura Shin: If Columbia University didn't create a wallet, how did they receive these tokens? This seems a bit unreasonable. Taran Sabharwal: As one of the main institutional holders of Ondo, Columbia University's tokens are in a non-circulating state because they have not created a wallet, objectively forming a "paper circulation" phenomenon. The project's tokenomics are notable: since the mass unlock in January this year, no new tokens will be released until January 2025. Market data shows that despite active perpetual contract trading, the depth of the spot order book is severely insufficient, and this artificial shortage of liquidity makes prices vulnerable to small amounts of money. In contrast, Mantra has adopted a more aggressive liquidity manipulation strategy. The project team transfers selling pressure to forward buyers through over-the-counter trading, and at the same time uses the proceeds to pull the spot market. With just $2000-$40 million in funding, it created a 100x price increase on the deeply deep order book, sending the market capitalisation soaring from $100 million to $12 billion. This "time arbitrage" mechanism is essentially a short squeeze using liquidity manipulation rather than a price discovery process based on real demand. Omar Shakeeb: The crux of the problem is that the project team has set up multiple lock-up mechanisms, but these lock-up terms have never been publicly disclosed, which is the trickiest part of the whole incident. José Macedo: Authoritative data sources like CoinGecko show significant distortion issues in token circulation. Project parties often include "inactive tokens" controlled by the foundation and team in circulation, resulting in a surface circulation rate of more than 50%, while the actual circulation entering the market may be less than 5%, of which 4% is still controlled by market makers. This systematic data manipulation has been suspected of fraud. When investors trade based on the false perception of 60% circulation, 55% of the tokens are actually frozen in cold wallets by the project team. This significant information gap directly distorts the price discovery mechanism, making only 5% of the real circulation a tool for market manipulation. Laura Shin: JP (Jump Trading) has been extensively studied, do you think this is an innovative model worth learning from, or does it reflect the short-term arbitrage mentality of market participants? How should the essence of such a strategy be characterised? Taran Sabharwal: JP's operations demonstrate subtle market supply and demand control, but its essence is an illusion of short-term value realised by artificially creating liquidity shortages. This strategy is unrepeatable and will undermine the healthy development of the market in the long run. The current market imitation phenomenon exposes the mentality of participants who are eager for quick success, that is, they pay too much attention to market value manipulation and ignore real value creation. José Macedo: There needs to be a clear distinction between "innovation" and "manipulation". In traditional financial markets, similar operations are characterised as market manipulation. The crypto market appears to be "legitimate" due to regulatory gaps, but this is essentially a wealth transfer through poor information rather than sustainable market innovation. Taran Sabharwal: The core issue is the behaviour patterns of market participants. In the current crypto market, the vast majority of retail investors lack basic due diligence awareness, and their investment behaviour is essentially closer to gambling than rational investment. This irrational mentality of chasing short-term profiteering objectively creates an ideal operating environment for market manipulators. Omar Shakeeb: The key to the problem is that the project team has set up multiple lock-up mechanisms, but these lock-up terms have never been publicly disclosed, which is the trickiest part of the whole incident. Taran Sabharwal: The truth of market manipulation is often hidden in the order book, and when a $1 million buy order can drive a 5% price movement, market depth simply doesn't exist. Many project parties take advantage of technical unlocking loopholes (tokens are unlocked but actually locked for a long time) to falsely report the circulating supply, causing short sellers to misjudge the risk. When Mantra first exceeded the 1 billion market capitalisation, a large number of short sellers liquidated their positions and left. WorldCoin is a typical case. Its fully diluted valuation was as high as $12 billion at the beginning of last year, but its actual circulating market value was only $500 million, creating a more extreme circulation shortage than ICP that year. Although this operation has allowed WorldCoin to maintain a valuation of 20 billion to this day, it is essentially harvesting the market through information gaps. However, JP needs to be evaluated objectively: during the trough of the market, he even sold his personal assets to buy back tokens and maintain the operation of the project through equity financing. This dedication to the project really shows the responsibility of the founder. Omar Shakeeb: JP is trying to turn the tide, but it's not easy to make a comeback after being in this situation. Once market trust collapses, it is difficult to rebuild. (5) The game between founders and VCs: the long-term value of token economy Laura Shin: Are there fundamental differences in our development philosophy on the crypto ecosystem, and are Bitcoin and Cex fundamentally different? Should the crypto industry prioritise token game design that encourages short-term arbitrage, or should it return to value creation? When price is disconnected from utility, does the industry still have long-term value? Taran Sabharwal: The problems of the crypto market are not unique, and there is also liquidity manipulation in small-cap stocks in the traditional stock market. However, the current crypto market has evolved into a fierce game between institutions, with market makers hunting proprietary traders, quantitative funds harvesting hedge funds, and retail investors have long been marginalised. The industry is gradually moving away from the original intention of encryption. When new institutions market Dubai properties to practitioners, the market substance has become a naked wealth harvesting game. A typical case is dBridge, which despite its leading cross-chain technology, with a token market cap of just $30 million; On the other hand, meme coins without technical content can easily break through the valuation of 10 billion yuan with marketing gimmicks. This distorted incentive mechanism is dismantling the foundations of the industry, and who will dive into polishing the product when traders can make a profit of $20 million by speculating on "goat coins"? The spirit of crypto is being eroded by the culture of short-term arbitrage, and the innovation drive of builders is being severely challenged. José Macedo: There are two very different narrative logics in the current crypto market. Thinking of it as a "casino" of zero-sum gaming and seeing it as an engine of technological innovation leads to the exact opposite conclusion. Although the market is full of speculative behaviours such as short-term VC arbitrage and project market value management, there are also many builders who are silently developing infrastructure such as identity protocols and decentralised exchanges. Just like in the traditional venture capital sector, 90% of startups fail to drive overall innovation. The central paradox of the current tokenomics is that a poor launch mechanism can permanently damage project potential, and who wants to join when engineers witness a token plummet by 80%? This highlights the importance of designing sustainable token models: both to resist short-term speculative temptations and to reserve resources for long-term development. It is exciting to see that more and more founders are proving that crypto technology can transcend financial games. Laura Shin: The real dilemma is how to define a "soft landing". Ideally, token unlocking should be deeply tied to ecological maturity. Only when the community is self-organised and the project enters the sustainable development stage, can the profit-making behaviour of the founding team be justified. However, the real dilemma is that almost all unlocking conditions can be manipulated except for the time lock, which is the core contradiction faced by the current token economic design. Omar Shakeeb: The root cause of the current token economy design problem begins with the initial round of financing negotiations between VCs and founders, emphasising that the token economy involves a balance of interests from multiple parties, both to meet the return demands of LPs and to be responsible to retail investors. However, in reality, project parties often sign secret agreements with leading funds (such as A16Z's investment in Aguilera's high valuation clause was disclosed months later), and retail investors cannot obtain details of OTC transactions, making liquidity management a systemic problem. Token issuance is not the end but a responsible starting point for the crypto ecosystem, and every failed token experiment is depleting market trust capital. If founders cannot ensure the long-term value of tokens, they should stick to the equity financing model. José Macedo: The misalignment of VC and founders' interests is the core contradiction, VCs pursue to maximise portfolio returns, and founders are inevitable to cash out in the face of huge wealth. Only when on-chain verifiable mechanisms (such as TVL fraud monitoring and liquidity knock-off verification) are perfect, can the market truly move towards regulation. (6) Industry outlets: transparency, collaboration and return to the essence Laura Shin: So far, we have sorted out the room for improvement among all participants, VCs, project parties, market makers, exchanges and retail investors themselves. How do you think it should be improved? Omar Shakeeb: For founders, the first priority is to verify product-market fit, not blindly pursue high funding. Practice shows that instead of raising 50 million yuan but not creating market demand, it is better to use 2 million yuan to verify feasibility and then gradually expand. This is also what we publish monthly private market liquidity reports. Only by putting all black box operations in the sun can the market achieve truly healthy development. Taran Sabharwal: The current structural contradictions in the crypto market have put founders in a dilemma. It is necessary to resist the temptation of short-term wealth and adhere to value creation, but also to deal with the pressure of high development costs. Some foundations have been alienated into founders' private vaults, and billions of dollars in market capitalisation of "zombie chains" continue to consume ecological resources. While meme coins and AI concepts are hyped in turn, infrastructure projects are mired in liquidity depletion, and some teams have even been forced to postpone token issuance for two years. This systemic distortion is seriously squeezing the living space of builders. Omar Shakeeb: For example, when Eigen was valued at $60-7 billion, there were $2000-30 million in the over-the-counter market, but the foundation refused to release liquidity. This ultra-conservative strategy was a missed opportunity to ask the team if they needed $20 million to accelerate the roadmap or allow early investors to cash out 5-10% of their positions for a reasonable return. The essence of the market is a collaborative network of value distribution, not a zero-sum game. If the project party monopolises the value chain, ecological participants will eventually leave. Taran Sabharwal: This exposes the most fundamental power game in the token economy, where founders always regard investors' early exit as a betrayal, while ignoring that liquidity itself is a key indicator of ecological health. When all participants are forced to lock up their positions, a seemingly stable market capitalisation actually hides systemic risks. Omar Shakeeb: The current crypto market urgently needs to establish a positive cycle of value distribution mechanism: allowing early investors to exit at a reasonable time not only attracts high-quality long-term capital, but also creates a synergistic effect of capital of different maturities. Short-term hedge funds provide liquidity, and long-term funds help development. This layered collaboration mechanism is far more effective than mandatory lock-up, and the key lies in building a bond of trust, and reasonable returns from Series A investors will attract continuous injection of strategic capital from Series B. José Macedo: Founders need to recognise the harsh reality that there are many failure stories behind every successful project. When the market is frantically pursuing a concept, most teams eventually run out of two years and cannot issue tokens, forming a vicious circle of concept arbitrage, which is essentially an overdraft of the industry's innovation. The real way to break the game is to return to the essence of the product and develop real demand with the minimum feasible financing, rather than chasing hot signals in the capital market. In particular, it is necessary to be wary of mass misjudgements caused by VC false signals. When a concept receives large funding, it often leads to founders misinterpreting it as a real market demand. As the gatekeeper of the industry, the exchange should strengthen its infrastructure functions, establish a market maker agreement disclosure system, ensure that the circulation data chain is verifiable, and standardise the over-the-counter transaction filing process. Only by improving the market infrastructure can we help founders get rid of the prisoner's dilemma of "death without hype" and promote the industry to return to the right track of value creation.

Source: Crypto Pump & Dumps Have Become the Ugly Norm. Can They Be Stopped? Organized & compiled: lenaxin, ChainCatcher   This article is compiled from an interview on the Unchained blog, featuring José Macedo, founder of Delphi Labs, Omar Shakeeb, co-founder of SecondLane, and Taran Sabharwal, CEO of STIX, who talked about liquidity shortages, market manipulation, inflated valuations, opaque lock-up mechanisms, and how the industry self-regulates in the crypto market. ChianCatcher has compiled the content. TL; DR The core function of market makers is to provide liquidity to tokens and reduce transaction slippage. Options incentives in the crypto market may induce "pump-and-dump" behaviour. It is recommended to adopt a fixed fee model to reduce the risk of manipulation. The crypto market can refer to the regulatory rules of traditional finance, but it needs to adapt to the decentralised nature. Exchange regulation and industry self-discipline are key entry points to promote transparency. The project party manipulated the market by falsely reporting circulation and passing on selling pressure from over-the-counter transactions. Reduce project financing valuations to avoid retail investors taking over high-bubble assets. The lock-up mechanism is opaque, and early investors are forced to liquidate informally, triggering a stampede: dYdX plummets. The interests of VCs and founders are misaligned, and token unlocking is disconnected from ecological development. The real liquidity, lock-up terms, and market maker dynamics are disclosed on the chain. Allow reasonable liquidity release and hierarchical capital cooperation. Refinance after verifying product demand to avoid misleading VC hotspots. (1) Functions and manipulation risks of market makers Laura Shin: Let's first dive into the role of market makers in the crypto market. What core problems do they solve for the project party and the market? At the same time, what are the potential manipulation risks of the current market mechanism? José Macedo: The core function of a market maker is to provide liquidity across multiple trading venues to ensure that the market has sufficient buying and selling depth. Its profit model mainly relies on bid-ask spreads. Unlike traditional financial markets, in the cryptocurrency market, market makers often acquire a large number of tokens through options protocols, thereby occupying a large proportion of the circulating supply, which gives them the potential to manipulate prices. Such options agreements typically contain the following elements: The strike price is usually based on the previous round of financing or a 25%-50% premium to the 7-day weighted average price (TWAP) after issuance. When the market price touches the strike price, the market maker has the right to exercise the option and make a profit. This protocol structure incentivises market makers to artificially drive up prices to some extent. Although mainstream market makers are generally more cautious, non-standard options agreements do carry potential risks. We recommend that the project team adopt a "fixed fee" model, where a fixed monthly fee is paid to hire market makers and require them to maintain reasonable bid-ask spreads and sustained market depth, rather than driving prices through complex incentive structures. In short, fees should be independent of token price performance; Cooperation should be service-oriented; Avoid distorting goals due to incentive mechanisms. Taran Sabharwal: The core value of market makers is to reduce trading slippage. For example, I once made a seven-figure trade on Solana that generated 22% on-chain slippage, and professional market makers were able to significantly optimise this metric. Given the cost savings for all traders for their services, market makers deserve to be paid accordingly. When choosing a market maker, project parties need to clarify incentive goals. Under the basic service model, market makers mainly provide liquidity and lending services; In the short-term consultation mode, short-term incentives are set around key nodes such as mainnet launches, such as stabilising prices through the TWAP trigger mechanism. However, if the strike price is set too high, market makers may execute option arbitrage and sell tokens on a large scale once the price far exceeds expectations, exacerbating market volatility. Lessons learned show that we should avoid setting excessively high strike prices and give preference to the basic service model to control the uncertainty caused by complex protocols. Omar Shakeeb: There are two core problems with the current market-making mechanism. First of all, there is a misalignment in the incentive mechanism. Market makers tend to focus more on arbitrage opportunities from rising prices than on their basic duties of providing liquidity. They should have been attracting retail traders to trade by continuously providing liquidity, rather than simply betting on price fluctuations to gain arbitrage gains. Second, there is a serious lack of transparency. Project parties usually employ multiple market makers at the same time, but these institutions operate independently of each other and lack a synergy mechanism. Currently, only project foundations and exchanges have a specific list of market maker cooperation, while secondary market participants have no access to relevant information about trade executors. This opacity makes it difficult to hold responsible parties accountable when abnormal situations occur in the market. (2) Movement turmoil: the truth about private equity, market making and transparency Laura Shin: Has your company been involved in Movement? Omar Shakeeb: Our company did participate in Movement, but only in private markets. Our business processes are extremely rigorous and we maintain close communication with the project founders, including Taran. We rigorously investigate and review the backgrounds of each investor, consultant, and other participants. However, we do not know the pricing and specific operations involved in the market-making process. Relevant documents are only held internally by the project foundation and market makers, and are not disclosed to other parties. Laura Shin: So, did your company work as a market maker during the project's token generation event (TGE)? However, I think the agreement between your company and the foundation should be very different from the market maker's agreement, right? Omar Shakeeb: No, we are not involved in the market making business. We are in the private markets business, which is a completely different area than the market making business. Private markets are essentially an over-the-counter (OTC) transaction that typically occurs before and after the TGE. José Macedo: Did Rushi sell tokens through OTC trading? Omar Shakeeb: As far as I know, Rushi did not sell tokens through OTC trading. The foundation has made it clear that it will not conduct a sell-off, but how to verify this commitment remains a difficult task. Market maker trading also carries this risk. Even if a market maker completes a large transaction, it may only sell tokens on behalf of the project team, and the outside world cannot know the specifics. This is exactly what the lack of transparency is about. I recommend starting from the initial stage of token distribution by clearly labelling wallets, such as "Foundation Wallet", "CEO Wallet", "Co-Founder Wallet", etc. In this way, the source of each transaction can be traced, making it clear what the actual sell-off is for all parties. José Macedo: We did consider flagging wallets, but this measure could raise issues such as privacy breaches and raising the bar for entrepreneurship. (3) Exchange and industry self-discipline: the feasibility of regulatory implementation José Macedo: As Hester Pierce emphasised in his recent safe harbour rule proposal, project parties should disclose their market-making arrangements. Currently, exchanges tend to maintain low liquidity to achieve high valuations, while market makers rely on poor information to obtain high fees. We can draw from the regulatory experience of traditional finance (TradFi). The Securities and Exchange Act of the 1930s and the market manipulation methods of the 70s and 80s of the 20th century, such as inducing retail investors to take over by inflating trading volume, are similar to some phenomena in the current cryptocurrency market. Therefore, we recommend introducing these established regulatory regimes into the cryptocurrency space to effectively curb price manipulation. Specific measures include: It is prohibited to manipulate market prices by means of false pending orders, preemptive trading, and preferential execution. Ensure transparency and fairness in price discovery mechanisms, preventing any actions that could distort price signals. Laura Shin: There are many challenges in achieving transparency between issuers and market makers. As Evgeny Gavoy pointed out on The Chop Block, there is a general lack of transparency in market-making mechanisms in Asian markets, and achieving global unified regulation is almost impossible. So, how can these obstacles be overcome? Is it possible to drive change through industry self-discipline? Is it possible to form a hybrid model of "global convention + regional implementation" in the short term? Omar Shakeeb: The biggest problem is the extremely opaque workings at the bottom of the market. If the leading market makers can spontaneously establish an open source information disclosure mechanism, this will significantly improve the current market situation. Laura Shin: But does this lead to the phenomenon of "bad money driving out good money"? Violators may avoid compliance agencies, so how can this bad behaviour be truly curbed? José Macedo: At the regulatory level, transparency can be promoted with the help of exchange review mechanisms. Specific measures include: requiring exchanges to publish the list of market makers and establishing a "compliance whitelist" system. In addition, industry self-discipline is equally important. For example, the audit mechanism is a typical case. Although not required by law, it is almost impossible to get investment for projects that are not audited today. Similarly, similar standards can be established for market maker qualification review. If a project is found to be using non-compliant market makers, its reputation will be damaged. Just as auditors have advantages and disadvantages, the reputation system of market makers also needs to be established. Regulatory implementation is feasible, and centralised exchanges are the key entry point. These exchanges generally want to serve US users, and US law has extensive jurisdiction over crypto businesses. Therefore, regardless of whether you are in the United States or not, as long as you use an exchange in the United States, you need to comply with relevant regulations. To sum up, exchange supervision and industry self-discipline can be important means to effectively regulate market behaviour. Laura Shin: You mentioned that market maker information should be made public and that compliant market makers should be recognised by the market. However, if someone deliberately selects a non-compliant market maker and such an institution itself lacks the incentive to publicly disclose the partnership, it may happen that the project party ostensibly uses a compliant market maker to maintain its reputation, but in fact entrusts an opaque institution to do so. The key questions are: How to ensure that the project party fully discloses all the market makers it works with? For market makers who do not take the initiative to disclose information, how can the outside world find out about their illegal operations? José Macedo: If an exchange is found to be using a non-whitelisted institution in violation of regulations, it is equivalent to fraud. Although project parties can theoretically cooperate with multiple market makers, in practice, due to the limited circulation of most projects, there are usually only 1-2 core market makers, so it is difficult to hide the real cooperation partners. Taran Sabharwal: This should be analysed from the perspective of market makers. First of all, it is one-sided to simply divide market makers into "compliant" and "non-compliant". How can an unregulated exchange be required to ensure the compliance of its trading entity? The top three exchanges (Binance, OKEx, and Bybit) are all offshore and unregulated institutions, while Upbit focuses on spot trading in the Korean market. Regulation faces many challenges, including geographical differences, head monopolies, and high entry barriers. In terms of the division of responsibilities, the project founder should bear the main responsibility for his manipulative behaviour. Although the censorship mechanism of exchanges is already quite strict, it is still difficult to eliminate circumvention operations. In the case of Movement, the problem is inherently social missteps, such as over-commitment and improper transfer of control, rather than technical flaws. Although its token market cap has dropped from 14 billion FTB to 2 billion, there are still many new projects following suit. However, the team's structural errors, particularly the improper transfer of control, ultimately led to the project being zeroed. Laura Shin: How should all parties work together to solve the many problems that are currently exposed? José Macedo: Disclosure of true circulation is key. Many projects inflate valuations by falsely stating circulating volume, but in reality, a large number of tokens are still locked up. However, tokens held by foundations and labs are usually not subject to lock-up periods, meaning they can sell them through market makers on the token's first day of launch. This operation is essentially a "soft exit" method: the team cashes out when the market is at its highest on the launch day, and then uses the funds to buy back unlocked team tokens a year later, or to use it to pull up the protocol's TVL in the short term and then withdraw the capital. In terms of token distribution mechanisms, cost-based unlocking mechanisms should be introduced, such as those of platforms like Legion or Echo. Currently, channels such as Binance Launchpool have obvious flaws, making it difficult to distinguish between real user funds and platform-owned funds in multi-billion dollar pools. Therefore, it is urgent to establish a more transparent public offering mechanism. Transparency in the market-making process and ensuring that retail investors have a clear understanding of the actual holdings of tokens are also crucial. While most projects have made progress in terms of transparency, further improvements are needed. To this end, it is essential to disclose the details of the market maker's token lending agreement, including key information such as the amount borrowed, option agreement, and its strike price, in order to provide retail investors with more comprehensive market insights and help them make more informed investment decisions. In general, disclosing the true circulation, standardising the disclosure of market-making agreements, and improving the token distribution mechanism are the most urgent reform directions at present. Omar Shakeeb: The first issue is to adjust the financing valuation system. The current project valuation is inflated, generally 30-5 billion US dollars, which is beyond the affordability of retail investors. In the case of Movement, its token fell from a valuation of 14 billion to 2 billion, an exorbitant initial valuation that did not benefit either party. It should return to the early valuation level of Solana ($3-400 million) to allow more users to participate at a reasonable price, which is also more conducive to the healthy development of the ecosystem. Regarding the use of ecosystem funds, we have observed that project parties often fall into operational difficulties, and are they handed over to market makers? Trading OTC? Or something else? We always recommend over-the-counter (OTC) transactions, which ensure that the recipient of funds is aligned with the project's strategic objectives. Celestia is a typical case, raising more than $100 million at a valuation of 3 billion after the token issuance, but achieved effective allocation of funds through reasonable planning. (4) The truth of market manipulation Laura Shin: Is the essence of the current market regulation measures to gradually guide artificially manipulated token activities, such as market maker intervention, to a development trajectory that is in line with the laws of the natural market? Can this transformation achieve a win-win situation for all parties, safeguarding the interests of early investors and ensuring the sustainable development of the project team? José Macedo: The structural contradiction facing the market today is the imbalance of the valuation system. In the last bull market, due to the scarcity of projects, the market showed a general rise; In this cycle, due to the overinvestment of venture capital (VC), there has been a serious surplus of infrastructure tokens, causing most funds to fall into a loss cycle and have to sell their positions to raise new funds. This imbalance between supply and demand directly changes market behaviour patterns. The buyer's funds are fragmented, and the holding period is shortened from years to months or even weeks. The OTC market has fully shifted to hedging strategies, with investors staying market-neutral through options instruments, bidding farewell to the naked long strategy in the previous cycle. Project parties must face up to this shift: the success of Solana and AVAX is built on industry blank periods, while new projects need to adopt small liquidity strategies (such as Ondo controlling actual circulation below 2%) and maintain price stability through over-the-counter agreements with large holders such as Columbia University. Projects such as Sui and Mantra, which have performed well in this round, have verified the validity of this path, and Movement's attempt to stimulate prices through tokenomics without a mainnet has proven to be a major strategic blunder. Laura Shin: If Columbia University didn't create a wallet, how did they receive these tokens? This seems a bit unreasonable. Taran Sabharwal: As one of the main institutional holders of Ondo, Columbia University's tokens are in a non-circulating state due to the lack of wallet creation, objectively forming a "paper circulation" phenomenon. The project's tokenomics are notable: since the large-scale unlock in January this year, no new tokens will be released until January 2025. Market data shows that despite active perpetual contract trading, the depth of the spot order book is severely insufficient, and this artificial shortage of liquidity makes prices vulnerable to small amounts of money. In contrast, Mantra adopts a more aggressive liquidity manipulation strategy. The project team transfers selling pressure to forward buyers through over-the-counter trading, and at the same time uses the proceeds to pull the spot market. Using just $2000-$40 million created a 100x price increase on a deeply weak order book, sending the market capitalisation soaring from $100 million to $12 billion. This "time arbitrage" mechanism is essentially a short squeeze using liquidity manipulation rather than a price discovery process based on real demand. Omar Shakeeb: The crux of the problem is that the project team has set up multiple lock-up mechanisms, but these lock-up terms have never been publicly disclosed, which is the trickiest part of the whole incident. José Macedo: Authoritative data sources such as CoinGecko show that there is a serious distortion problem with token circulation. Project parties often include "inactive tokens" controlled by the foundation and team in the circulation, resulting in a surface circulation rate of more than 50%, while the actual circulation of the market may be less than 5%, of which 4% is still controlled by market makers. This systematic data manipulation has been suspected of fraud. When investors trade based on the wrong perception of 60% of the circulating supply, 55% of the tokens are actually frozen in cold wallets by the project team. This significant information gap directly distorts the price discovery mechanism, making only 5% of the real circulation a tool for market manipulation. Laura Shin: JP (Jump Trading) has been extensively studied, do you think this is an innovative model worth learning from, or does it reflect the short-term arbitrage mentality of market participants? How should the essence of such a strategy be characterised? Taran Sabharwal: JP's operations demonstrate subtle market supply and demand control, but their essence is an illusion of short-term value realised through artificially created liquidity shortages. This strategy is unrepeatable and will undermine the healthy development of the market in the long run. The current market imitation phenomenon exposes the mentality of participants who are eager for quick success, that is, they pay too much attention to market value manipulation and ignore real value creation. José Macedo: There is a clear distinction between "innovation" and "manipulation". In traditional financial markets, similar operations are characterised as market manipulation. The crypto market appears to be "legitimate" due to regulatory gaps, but this is essentially a wealth transfer through poor information rather than sustainable market innovation. Taran Sabharwal: The core issue is the behaviour patterns of market participants. In the current crypto market, the vast majority of retail investors lack basic due diligence awareness, and their investment behaviour is essentially closer to gambling than rational investment. This irrational mentality of chasing short-term profiteering objectively creates an ideal operating environment for market manipulators. Omar Shakeeb: The key to the problem is that the project team has set up multiple lock-up mechanisms, but these lock-up terms have never been publicly disclosed, which is the trickiest part of the whole incident. Taran Sabharwal: The truth of market manipulation is often hidden in the order book, and when a $1 million buy order can drive a 5% price movement, it means that market depth does not exist at all. Many project parties take advantage of technical unlocking loopholes (tokens are unlocked but actually locked for a long time) to falsely report the circulating supply, causing short sellers to misjudge the risk. When Mantra first exceeded the market value of 1 billion, a large number of short sellers liquidated their positions and left. WorldCoin is a typical case. At the beginning of last year, its fully diluted valuation was as high as 12 billion, but the actual circulating market value was only 500 million, creating a more extreme circulation shortage than ICP that year. Although this operation has allowed WorldCoin to maintain a valuation of 20 billion yuan to this day, it is essentially harvesting the market through information gaps. However, JP needs to be evaluated objectively: during the market trough, he even sold his personal assets to buy back tokens and maintain the operation of the project through equity financing. This dedication to the project really shows the responsibility of the founder. Omar Shakeeb: JP is trying to turn the tide, but it is not easy to make a comeback after being in this situation. Once market trust collapses, it is difficult to rebuild. (5) The game between founders and VCs: the long-term value of the token economy Laura Shin: Are there fundamental differences in our development philosophy of the crypto ecosystem, and are Bitcoin and CEX fundamentally different? Should the crypto industry prioritise token game design that encourages short-term arbitrage, or should it return to value creation? When price is disconnected from utility, does the industry still have long-term value? Taran Sabharwal: The problems of the crypto market are not unique, and there is also liquidity manipulation in small-cap stocks in the traditional stock market. However, the current crypto market has evolved into a fierce game between institutions, with market makers hunting proprietary traders, quantitative funds harvesting hedge funds, and retail investors have long been marginalised. The industry is gradually moving away from the original intention of encryption. When new institutions market Dubai properties to practitioners, the market substance has become a naked wealth harvesting game. A typical example is dBridge, which despite its leading cross-chain technology, has a token market cap of only $30 million; On the other hand, meme coins without technical content can easily break through the valuation of 10 billion yuan with marketing gimmicks. This distorted incentive mechanism is dismantling the foundations of the industry, and who will dive into polishing the product when traders can make a profit of $20 million by hyping "goat coins"? The spirit of crypto is being eroded by the culture of short-term arbitrage, and the innovation drive of builders is being severely challenged. José Macedo: There are two very different narrative logics in the current crypto market. Thinking of it as a "casino" of zero-sum games and seeing it as an engine of technological innovation leads to the exact opposite conclusion. Although the market is full of speculative behaviours such as short-term VC arbitrage and project market value management, there are also many builders who are silently developing infrastructure such as identity protocols and decentralised exchanges. Just like in the traditional venture capital field, 90% of startups fail but drive overall innovation. The core paradox of the current token economy is that a poor launch mechanism can permanently damage project potential, and who wants to join when engineers witness a token plummet by 80%? This highlights the importance of designing sustainable token models: both to resist short-term speculative temptations and to reserve resources for long-term development. It is exciting to see that more and more founders are proving that crypto technology can transcend financial games. Laura Shin: The real dilemma is how to define a "soft landing". Ideally, token unlocking should be deeply tied to ecological maturity. Only when the community is self-organised and the project enters the sustainable development stage, can the profit-making behaviour of the founding team be justified. However, the real dilemma is that almost all unlocking conditions can be manipulated except for the time lock, which is the core contradiction faced by the current token economic design. Omar Shakeeb: The root cause of the current token economy design problem begins with the first round of financing negotiations between VCs and founders, emphasising that the token economy involves a balance of interests between multiple parties, which must not only meet the return demands of LPs, but also be responsible to retail investors. However, in reality, project parties often sign secret agreements with leading funds (such as A16Z's investment in Aguilera's high valuation clause before it is disclosed several months later), and retail investors cannot obtain details of over-the-counter transactions, resulting in liquidity management becoming a systemic problem. Token issuance is not the end but a responsible starting point for the crypto ecosystem, and every failed token experiment is depleting market trust capital. If founders cannot ensure the long-term value of tokens, they should stick to the equity financing model. José Macedo: The misalignment of the interests of VCs and founders is the core contradiction, VCs pursue to maximise portfolio returns, and founders are inevitable in the face of huge wealth. Only when on-chain verifiable mechanisms (such as TVL fraud monitoring and liquidity knock-out verification) are perfect, can the market truly move towards regulation. (6) Industry outlets: transparency, collaboration and return to the essence Laura Shin: So far, we have sorted out the room for improvement among all participants, VCs, project parties, market makers, exchanges and retail investors themselves. How do you think it should be improved? Omar Shakeeb: For founders, the first priority is to verify product-market fit, not blindly pursue high funding. Practice shows that instead of raising 50 million yuan but not creating market demand, it is better to use 2 million yuan to verify feasibility and then gradually expand. This is also what we publish monthly private market liquidity reports. Only by putting all black box operations in the sun can the market achieve truly healthy development. Taran Sabharwal: The current structural contradictions in the crypto market have put founders in a dilemma. It is necessary to resist the temptation of short-term wealth and adhere to value creation, but also to deal with the pressure of high development costs. Some foundations have been alienated into founders' private vaults, and billions of dollars in market capitalisation of "zombie chains" continue to consume ecological resources. While meme coins and AI concepts are being hyped in turn, infrastructure projects are mired in liquidity depletion, and some teams have even been forced to postpone token issuance for two years. This systemic distortion is seriously squeezing the living space of builders. Omar Shakeeb: For example, when Eigen is valued at $60-7 billion, there are $2000-30 million in the OTC market, but the foundation refuses to release liquidity. This ultra-conservative strategy was a missed opportunity to ask the team if it needed $20 million to accelerate the roadmap or allow early investors to liquidate 5-10% of their positions for a reasonable return. The essence of the market is a collaborative network of value distribution, not a zero-sum game. If the project party monopolises the value chain, ecological participants will eventually leave. Taran Sabharwal: This exposes the most fundamental power game in the token economy, where founders always regard investors' early exit as a betrayal, while ignoring that liquidity itself is a key indicator of ecological health. When all participants are forced to lock up their positions, a seemingly stable market capitalisation actually hides systemic risks. Omar Shakeeb: The current crypto market urgently needs to establish a positive cycle of value distribution mechanism: allowing early investors to exit at a reasonable time not only attracts high-quality long-term capital, but also creates a synergistic effect of capital of different maturities. Short-term hedge funds provide liquidity, and long-term funds help development. This hierarchical collaboration mechanism is far more effective than forced lock-up, and the key is to build a bond of trust, and the reasonable returns of Series A investors will attract the continuous injection of strategic capital in Series B. José Macedo: Founders need to recognise the harsh reality that there are many failure stories behind every successful project. When the market is frantically pursuing a concept, most teams eventually run out of two years and cannot issue tokens, forming a vicious circle of concept arbitrage, which is essentially an overdraft of the industry's innovation. The real way to break the game is to return to the essence of the product and develop real demand with the minimum feasible financing, rather than chasing hot signals in the capital market. In particular, it is necessary to be wary of mass misjudgements caused by VC wrong signals. When a concept receives large funding, it often leads to founders misinterpreting it as a real market demand. As the gatekeeper of the industry, the exchange should strengthen its infrastructure functions, establish a market maker agreement disclosure system, ensure that the circulation data chain is verifiable, and standardise the over-the-counter transaction filing process. Only by improving the market infrastructure can we help founders get rid of the prisoner dilemma of "death without hype" and promote the industry to return to the right track of value creation.