Some market makers make profits through token lending, which may "kill" small crypto projects

PANews reported on April 17 that according to Cointelegraph, some market makers are turning token loans into a profitable machine and putting small crypto projects into a death spiral. It is reported that a market maker model called the "loan option model" will allow the project to lend to market maker tokens, and the market maker will use these tokens to provide liquidity, stabilize prices, and assist the project in launching a crypto trading platform. However, in the behind-the-scenes operation, some market makers are using this controversial token loan structure to make profits for themselves. These agreements are often packaged as "low risk, high returns", but in fact they will seriously hit the token price, putting the fledgling crypto team in chaos and struggle.

Ariel Givner, founder of Givner Law Law, said, "It works by: market makers borrow tokens from the project party at an agreed price. In exchange, they promise to help these tokens go online to large trading platforms. If they fail to fulfill their promise, they need to repay the tokens at a higher price within a year." But what often happens in reality is that market makers sell the borrowed tokens, triggering a preliminary price plunge. After the token price is smashed, they repurchase the tokens at a low price to make profits from it.