Crypto’s Market-Making Infrastructure Needs An Upgrade
Market makers are the grease that keeps financial wheels turning. In crypto, they’ve often been the grit. For more than a decade, firms paid to provide liquidity in digital tokens have faced accusations of inflating volumes, propping up prices and engineering pump-and-dump schemes. Token projects, desperate for liquidity, signed opaque deals with trading firms whose incentives weren’t always aligned with their own. The result has been a business that looks less like financial plumbing and more like a Wild West shoot-out.
Now change is afoot. As more traditional investors enter the sector, expectations are shifting. Demands for transparency, compliance and proof of fair play are on the up. At the same time, on-chain infrastructure is evolving in ways that make trading behavior auditable in real time. Crypto’s market makers, long shielded by opacity, are about to be dragged blinking into the light.
A house of ill repute
The abuses are hardly theoretical. A recent report by Chainalysis estimated that wash trading accounted for $2.6bn of crypto-exchange volumes last year. Around 3.5% of all tokens launched last year displayed the tell-tale signs of pump-and-dump schemes. The share looks modest until one recalls that more than 2m tokens were launched in the same period. Few ever found an active market. Many seemed designed only to exploit early enthusiasm before vanishing into obscurity.
Such practices would be illegal in conventional finance. …
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