Price swings can be extreme in the crypto space, and market makers play a critical role in maintaining price stability and liquidity. Traders may face massive price gaps, huge delays, and unpredictable trading conditions without them. Market makers profit from trading volumes and spreads, but practices like wash trading and price manipulation are far from unheard of.
Since its inception, the cryptocurrency market has been marred by controversial and unethical market-making practices. Even established companies like Tether and Bitfinex have faced accusations of manipulating Bitcoin and other cryptocurrency prices through their market-making activities.
Wash trading involves buying and selling the same token to create an artificial trading volume. Entities create the illusion of volume by repeatedly trading the same token, misleading investors and distorting market activity. In light of these cases, ethical market-making platforms like Kairon Labs stand out with their continued focus on creating a healthy market environment.
The dark side of market making: Wash trading in numbers
Illicit platforms fool investors or trader communities and give legitimate market makers a bad name. Wash trading occurs on centralized (CEXs) and decentralized exchanges (DEXs). DEXs charge gas fees on trading, which render wash trading costlier, but this hasn’t stopped the cowboys. Chainalysis reported that five DEX pools perpetrated wash trading worth $78 million in April 2024. The number of pools implicated in this activity remained relatively constant, even though suspected wash trading volumes fluctuated throughout 2024. Their monthly average was 1,400 of approximately half a million active pools, which indicates that wash trading is driven by a limited number of actors or concentrated in specific pools.
Rogue market makers create fake trading volume by providing customers with trading bots. Customers purchase bots within a price range of $50 to $100,000, and a bot that generates $100,000 in trading volume within 24 hours costs around $2,000 in ETH. It purchases and sells a token back and forth rapidly after the customer pays the fee.
Trustworthy market makers make all the difference
There are different types of market makers, exchange and token market makers being the main ones. Exchange market makers aim to create a stable, sufficiently liquid trading environment for a specific crypto exchange. In contrast, token issues engage token market makers to help ensure liquidity for a specific cryptocurrency, especially in its early stages or when trading volume is low. This type of market-making helps new assets gain visibility and traction in a crowded market. However, there can be a discrepancy between what legitimate platforms offer and what some token projects hope to achieve.
Kairon Labs fills a gap in the digital asset market as a professional market maker known for institutional-grade liquidity solutions. It helps maintain sustainable market conditions and optimize liquidity strategies. Operating on a service-based model, the platform offers customized market-making solutions for DEXs, CEXs, and crypto projects and is trusted by token issues and investors alike. Kairon Labs’ proprietary trading software ensures global market coverage around the clock through integration into a network of 100+ exchanges. The algorithms adapt to market shifts instantaneously, maintaining adequate liquidity and tight spreads with remarkable precision.
The platform leverages deep analytics to keep up with the markets and continuously refine its offerings, which makes it a suitable choice for projects that require tailored market-making services.
Efforts to create lasting value can ensure sustainability
Law enforcement is catching up with cowboy-style platforms that fool investors and communities. The US Attorney’s Office of the District of Massachusetts recently charged four market makers with advertising market manipulation services such as “pump and dump” schemes and wash trading. The clients of one of the companies had access to a dashboard where they entered the number of desired daily wash trades on specified crypto exchanges. The service was described as “volume support.”
Generating sufficient trading volumes for exchanges to waive listing fees was another goal. In terms of secondary market objectives, the defendants stated they aimed to find other buyers from the community who would lose money so their clients could make a profit. The rogue market makers advertised trading bots that could generate volume and discussed the services with clients through video conferences and Telegram messages. They used multiple trading wallets so the trades wouldn’t look “fake.” In contrast to these practices, top-tier exchanges like Binance and Coinbase delist or outright refuse to list tokens that don’t meet their trading volume requirements or terms and conditions.
Nothing old forgotten, nothing new learned
Essentially, fraudulent platforms are applying age-old schemes like front-running to a new asset class. These practices are declining thanks to regulatory efforts and legitimate market makers, a process that also transpires in traditional markets. Lasting market value benefits all stakeholders. Traditional markets prioritize value over growth stocks, and crypto markets are adopting this practice. While growth stocks capture headlines with their swift price gains, value stocks have historically been able to deliver sustainable returns.
Numerous studies have demonstrated that value stocks tend to outperform growth stocks over time, especially during periods of economic uncertainty or market downturns. Value stocks offer investors a safety margin, and the downside risk is often limited because these companies trade at a discount on their inherent value. Value assets have solid fundamentals and hold up better even in volatile markets. Investors can avoid the pitfalls of deception and speculation by working with ethical market makers who help them identify truly valuable assets.
