Odaily Planet Daily News Some market makers are turning token loans into a profit 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 projects to lend tokens to market makers, who will then use these tokens to provide liquidity, stabilize prices, and assist projects in listing on crypto trading platforms. However, behind the scenes, some market makers are using this controversial token loan structure to make profits for themselves. These agreements are often packaged as "low risk, high return", but in fact they will severely hit token prices, causing the fledgling crypto teams to fall into chaos and struggle.
Ariel Givner, founder of Givner Law, said, "The way it works is: market makers borrow tokens from project parties at a certain agreed price. In exchange, they promise to help these tokens go online on large trading platforms. If they fail to fulfill their promises, they need to repay these tokens at a higher price within one year." But what often happens in reality is that market makers sell off the borrowed tokens, causing an initial price crash. After the token price is smashed, they buy back the tokens at a low price to make a profit. (Cointelegraph)