Tuesday Newsletter

Explore the latest trends, gain valuable insights, and stay informed in the dynamic cryptocurrency ecosystem.

25 June 2024

A recent analysis reveals that up to 78% of new token listings since April 2024 have been mismanaged. Why do market makers seem indifferent?

Is every new cryptocurrency listing a pump-and-dump scheme? Many investors think so, and with good reason. Each time a new token appears on an exchange, there’s often a meteoric rise to unsustainable prices, followed by a steep collapse, leaving many holding worthless tokens.

Who is pulling the strings? The answer lies with market makers, the companies hired by crypto projects to manage the tokens (or liquidity) when they first hit exchanges.

Primary Listings in Crypto

The process of bringing a digital asset to the public market via primary listings is similar to an initial public offering (IPO) in traditional markets, but with a significant twist: digital asset issuers often underprice the opening price, leading to a much higher first-day performance compared to traditional markets.

In traditional markets, passive investors typically hold shares. In the digital asset space, tokens are ideally held by active participants, with market success hinging on the strength of its holders. Unlike IPOs, where investment banks set the offer prices, token prices in public rounds are often lower than fair market value, leading to higher first-day surges in digital markets.

During a primary listing, a market maker (MM) takes a large portion of a token’s circulating supply and lists it for sale on an exchange’s pre-market order book. This ensures sufficient liquidity for efficient price discovery when the market opens. However, some MMs undercapitalize order books to inflate short-term profits, harming both the token community and the project. This practice, known as “parasitic” market making, prioritizes MM profits over market health.

Approaches to Market Making

There are three main approaches to supplying liquidity during a primary listing:

  1. Parasitic Market Making: This approach exploits pre-market conditions by creating artificial scarcity and manipulating sentiment. Parasitic MMs place high sell orders to absorb demand, causing the token price to decline after an initial spike, often causing irreversible market damage.
  2. Transitory Market Making: Here, the MM places overwhelming sell orders to fill positions quickly and maximize fees or close OTC trades. This leads to a rapid market exit, removing potential price upside by heavily selling off the token.
  3. Symbiotic Market Making: In this approach, the MM strategically sets up opening liquidity to build long-term value and ensure accurate price discovery. By providing liquidity on both sides, the MM facilitates an orderly process that reflects the asset’s true market value.

To categorize market makers by their approach, we tracked the price multiple performances of tokens within two critical periods: the initial two days post-listing (analyzed hourly) and the first two weeks (analyzed daily). Data sourced from the project’s primary trading platform or reliable aggregators was normalized for comparative analysis across different projects, with a focus on the Relative Change in Volatility (RCV).


The RCV formula measures volatility change with and without a token’s all-time high (ATH) price. A positive RCV indicates an undersupplied order book and inadequate pre-market liquidity, while a negative RCV points to an oversupplied order book and aggressive market making, leading to an overpriced asset. A neutral RCV value signifies correct liquidity for orderly price discovery.

Key Findings

Applying the RCV methodology to 93 listings from April 2024 onwards on exchanges like Bybit, KuCoin, Binance, Coinbase, Kraken, and OKX, we found that:

69.9% of primary listings were categorized as “Parasitic”

8.6% were “Transitory”

Only 21.5% were “Symbiotic”

This means 78.5% of launches disrupted fair price discovery, negatively impacting both users and projects.

For parasitic launches, including the ATH point resulted in a 420% increase in market volatility, indicating severe undersupply and inflated prices that lead to market abandonment. Transitory launches showed a 34% decrease in volatility when including the ATH, pointing to an oversaturated order book that benefited only the MM. Both approaches significantly impair price discovery, reducing sustained market engagement. In contrast, symbiotic approaches yielded an RCV of around ±20%, providing a stable foundation for fair and healthy price discovery.

The Path Forward

As the digital asset industry grows in legitimacy and size, it is crucial for market makers to address the mismanagement of primary listings. Asset issuers and exchanges should engage market makers and leverage the RCV methodology to ensure initial order books are structured appropriately.

Market makers currently have a poor reputation, and the data supports this perception. It’s time to raise the standards, eliminate parasitic practices, and hold market makers accountable for their vital role in enabling efficient price discovery. The industry deserves better.

Coinbase has provided assurance to the crypto community, stating that the sell-off’s impact on the market would be minimal.

 It highlights that a considerable portion of the funds is expected to remain within the ecosystem, ensuring a balanced overall effect.

Genesis’s move aligns with its commitment to repay creditors, as stipulated by the bankruptcy plan, which permits the conversion of GBTC shares into Bitcoin or their outright sale for cash distribution.

This development emerges amid disputes from the Digital Currency Group (DCG) regarding Genesis’s proposed repayment plan. DCG, through its subsidiary Genesis, filed for Chapter 11 bankruptcy in January 2023, contending that the proposed plan might overcompensate lenders beyond their entitlement.