Unveiling the IPO Strategy for New Cryptocurrencies: How to Become the New Musang King

Author: Raysky, X@rayskyinvest

In a market environment characterized by insufficient spot liquidity, market makers are forced to focus on the perpetual swap market, which sees growing trading volume. To this end, various parties have racked their brains to establish a bridge between spot and futures trading, organically integrating the liquidity and profit and loss determination rules of the two. This has ultimately led to the emergence of new token economics models and community expectation management mechanisms, creating a dramatic double-edged sword for "demon coins."

So-called "demon coins" are a combination of specific market conditions: highly concentrated chips (i.e., "low circulation, high market control"), and simultaneous listing in both the illiquid spot market and the highly liquid, highly leveraged perpetual swap market. This article will analyze the complete lifecycle of this manipulation process, from the initial token economics design that facilitated the manipulation, to the manipulation of retail investor sentiment, to the precise execution of spot-driven attacks, with the ultimate goal of triggering chain liquidations in the derivatives market to generate profits. Disclaimer This article does not endorse this behavior or target any specific project or exchange. Instead, it provides a technical, quantitative, and objective analysis of the mechanism to help sophisticated market participants identify and potentially mitigate the associated risks. Part I: Trap Construction: Preparatory Work Before Manipulation The success of the entire operation depends on a carefully designed market structure that allows the manipulator to establish near-absolute control over the asset's supply and price discovery mechanism before any significant retail investor participation. 1.1. Manufactured Scarcity: A Low Float, High Control Token Economics Model This strategy begins not during trading but during the token's conception. Manipulators, typically the project owner or their closely affiliated backers, design a token economics model that ensures the vast majority of the token supply (e.g., 95%) is locked or held by insiders, leaving only a tiny fraction—the "floating supply"—available for public trading at the initial launch. This "low float, high fully diluted valuation" (FDV) model creates artificial scarcity. Due to the limited number of tokens in circulation, even a small amount of buying pressure can lead to rapid price increases and extremely high volatility. This dynamic is intentional because it significantly reduces the capital required for manipulators to arbitrarily drive the spot price. This token economics model is designed to create a market that is structurally highly susceptible to the spot-driven liquidation strategies detailed in this report. While a normal project launch aims to build community through decentralization and fair distribution, the low-volume model does the opposite: it concentrates power. Major holders gain near-total price control. Manipulators don't need to "stock up" later; they control the market from the outset. When this pre-designed asset is placed in a dual-listed spot and futures market, its token economics becomes a weapon. Low liquidity ensures that the spot price can be easily manipulated, while the futures market provides a pool of leveraged participants to be exploited. Therefore, token economics is a prerequisite for this strategy. Without this level of control, the cost of manipulating the spot price would be prohibitive. Choosing the right token economics is the first and most critical step in the manipulation playbook. From a psychological perspective, despite a low circulating supply, a high FDV creates the illusion of a large and ambitious project, while a low circulating supply creates initial hype and a "scarcity effect," attracting speculative retail interest and setting the stage for subsequent fear of missing out (FOMO). 1.2. Dual Listing Catalyst: Building a Two-Pronged Battlefield Simultaneous or near-simultaneous listings on liquid spot exchanges and perpetual swap markets are key components of the overall strategy. Platforms like Binance Alpha serve as a "pre-listing token screening pool," signaling potential future mainboard listings and building initial hype. The two battlefields are:

• The spot market (control zone): This is where manipulators leverage their overwhelming supply advantage. Due to the extremely small circulating supply, they can manipulate prices with relatively little capital.

• The perpetual swap market (harvest zone): This is where retail investors and speculative capital gather. It offers high leverage, magnifying retail traders' positions and making them extremely vulnerable to liquidations. Manipulators' primary goal isn't to profit from spot trading, but to leverage their control over spot prices to trigger more profitable events in this secondary battlefield.

The introduction of derivatives alongside spot assets creates a powerful synergy. It increases overall market liquidity, price synchronization, and efficiency, but within this controlled environment, it also creates a direct attack vector for manipulation. Part 2: Market Warming Up: Creating Sentiment and Measuring Risk Exposure Once the market structure is established, the manipulator's next step is to attract targets into the harvest zone (the futures market) and accurately measure their risk exposure. This involves creating a false narrative of activity and demand, while using derivatives data as a "fuel gauge." 2.1. The Illusion of Activity: Wash Trading and Falsified Trading Volume A new token with low trading volume lacks appeal. Manipulators must create the illusion of an active, liquid market to attract retail traders and automated trading bots that use trading volume as a key indicator. To achieve this, manipulators use multiple controlled wallets to trade with themselves in the spot market. On-chain, this manifests as the circular flow of funds or assets between related parties. This behavior artificially inflates trading volume metrics on exchanges and data aggregators, creating a misleading impression of high demand and liquidity. While sophisticated, this behavior can be identified by analyzing specific patterns in on-chain data: High-frequency trading between a small number of unknown exchanges or market maker wallets. Buy and sell orders for the trades occur almost simultaneously, without any meaningful change in beneficial ownership. There is a mismatch between reported high trading volumes and shallow order book depth or low on-chain holder growth. 2.2. Understanding the Derivatives Battlefield: Open Interest and Funding Rate Analysis Manipulators do not trade blindly. They meticulously monitor the derivatives market to assess the effectiveness of their pre-heating efforts. The two most critical indicators are open interest (OI) and funding rates. Manipulators use open interest and funding rates not as predictive indicators like ordinary traders, but rather as a real-time feedback and targeting system. These indicators act like a "fuel gauge," precisely telling them when the market is sufficiently penetrated by one-sided leverage, maximizing profits and making a liquidation storm self-sustaining. An ordinary trader observing high open interest and positive funding rates might think, "The trend is strong, perhaps I should go long," or "The market is overextended, a reversal is likely." Their perspective is probabilistic. Manipulators controlling spot prices, on the other hand, have a deterministic perspective. They know they can force prices down. Their question isn't whether a reversal will occur, but when it will trigger its most profitable range—in other words, when to "cut the losses." Rising open interest tells them that the number of leveraged positions is increasing. High funding rates tell them that these positions are overwhelmingly one-sided. The combination of these two indicators allows manipulators to quantify the size of the "liquidation pool." They can estimate the dollar value of positions that would be liquidated at various price points below the market. Therefore, they aren't predicting market tops, but rather waiting for the perfect moment to create them. Open interest and funding rates are their signals that the system has enough "fuel" to launch a successful attack. Open Interest (OI) as a measure of "fuel": OI represents the total number of open futures contracts. A rising OI, especially during an uptrend, indicates that new money and new leveraged positions are entering the market. This isn't just existing traders swapping positions, but rather an expansion of the overall bet size. For manipulators, a rising OI confirms that the pool of potential liquidation targets is expanding. Funding Rate as a Sentiment Measure: Funding is the payment exchanged between long and short position holders to anchor the perpetual contract price to the spot price. High Positive Funding Rate: The futures price is higher than the spot price. Longs pay shorts. This indicates extremely bullish market sentiment and a high concentration of leveraged long positions. High Negative Funding Rate: The futures price is lower than the spot price. Shorts pay longs. This indicates extremely bearish market sentiment and a high concentration of leveraged short positions. Combination Signals: Manipulators await a specific combination of signals: a sharp increase in open interest accompanied by a sustained high funding rate (either positive or negative). This combination of signals indicates that a large number of retail traders have established leveraged positions in the same direction, forming a dense cluster of liquidation levels below (for longs) or above (for shorts) the current price. This is the "fuel" for cascading liquidations. 2.3. Narrative Warfare and the Creation of FOMO In parallel with the quantitative pre-money campaign, manipulators often also launch a "soft power" offensive. This involves leveraging social media, paid influencers, and press releases to construct a compelling narrative around the token. Announcements of fake partnerships, foreshadowing "major developments," or simply promoting "get-rich-quick" narratives can all trigger intense FOMO. This psychological manipulation drives retail traders into the futures market, leading them to place leveraged bets, directly feeding into the OI and funding rate metrics that manipulators monitor. Part 3: Execution: Weaponizing the Mark Price This is the momentum phase of the operation. Manipulators leverage their control over the spot market to launch direct and precise attacks on the derivatives market, weaponizing the exchange's own mechanisms. 3.1. Mechanical Connection: A Deep Dive into the Mark Price Calculation The key to the entire strategy is that perpetual swap liquidations are triggered by the Mark Price, not the Last Traded Price. This is a crucial distinction. The Last Traded Price can be highly volatile and easily manipulated within a single exchange, so exchanges use the more robust Mark Price to prevent unfair liquidations. While the Mark Price formula varies slightly between exchanges, it's fundamentally based on an index price plus a decaying funding rate component. The index price is the volume-weighted average of the asset's spot prices across multiple major exchanges. This design creates a direct and unavoidable chain of cause and effect: manipulator's spot market behavior → spot price movement → index price movement → mark price movement → triggering liquidations. By controlling the dominant spot market for an illiquid new token, the manipulator effectively controls the primary input variable in the mark price calculation. They aren't influencing the liquidation mechanism; they're manipulating it. The manipulator is exploiting the exchange's inherent risk management system—the mark price and automated liquidation engine—as a tool for profit amplification. This system was designed to protect exchanges and traders from excessive risk, but when a single entity controls the underlying spot price, it becomes a mechanism for "harvesting" itself. Exchanges introduce mark price mechanisms to prevent manipulation based on the most recent price traded on a single exchange, assuming that the aggregated index price is difficult for any single actor to manipulate. This assumption holds true for highly liquid, decentralized assets like BTC or ETH. However, for a new token with low liquidity, the index price may consist of only one or two "exchanges" (some simply liquidity pools on decentralized exchanges). By controlling a majority (e.g., 98%) of the circulating supply, manipulators can easily control the price of the most important input variable in the index price calculation. Thus, manipulators weaponize the exchange's safeguards. Chained liquidations are not a secondary objective of their actions, but their primary goal. The forced market orders generated by liquidations provide manipulators with a vast amount of liquidity to close out their massive futures positions at highly competitive prices. 3.2. Short Squeeze Script (Harvesting Shorts) Prerequisites: The manipulator observes falling prices, rising open interest, and deeply negative funding rates (funding rates can also be used as a means of inducing longs and shorts), indicating the accumulation of a large leveraged short position. Retail sentiment is bearish. Stage 1: Position Building: The manipulator quietly establishes a large long position in the perpetual swap market, typically absorbing selling pressure from retail shorts. They are happy to temporarily pay the negative funding rate, viewing it as the cost of setting a trap. Stage 2: Spot Market Attack: The manipulator uses a small portion of their large token holdings to execute a series of large buy orders in the spot market. Due to the extremely small public float, this action requires relatively little capital to trigger a large, almost instantaneous price surge. Stage 3: Chain Liquidations: The surge in spot prices immediately pushed up the index price. The index price, in turn, pulled the mark price higher. The rising mark price hit the liquidation level for the most leveraged short positions. These liquidations were forced into market buy orders, further increasing upward price pressure. This created a feedback loop or a "short squeeze": forced buying pushed up prices, liquidating the next tier of shorts, which in turn generated more forced buying, and so on. This chain reaction continued until most short positions were eliminated. 3.3. Long Kill Long Scenario (Harvesting Longs) Prerequisites: Manipulators observe rising prices (often driven by their own wash trading and hype), surging open interest, and high positive funding rates (funding rates can also be used as a means to induce long and short positions). Retail investors are enthusiastic and use leverage to go long. Stage 1: Position Building: Manipulators establish a large short position in the perpetual swap market. They collect funding fees from numerous long positions, profiting while they wait. Stage 2: Spot Market Attack: Manipulators dump a small portion of their token holdings into the spot market. This sudden, massive selling pressure immediately causes the spot price to plummet.

Stage 3: Chain Liquidations:

• The plummeting spot price pulled down the index price, and therefore the mark price.

• The falling mark price triggered liquidations of leveraged long positions.

• These liquidations were forced into market sell orders, further increasing downward price pressure.

• This created a "long killing long" or chain liquidation effect, where forced selling triggered more forced selling, clearing out long positions like dominoes until the excessive leverage in the market was eliminated.

Part IV: The Aftermath: Profits, Risks, and Identification

4.1. Profit Realization

Closing Profits:

Primary profits come from the large futures positions established during the first step of the execution phase. During the cascading liquidation period, a large number of forced market orders (buy orders in a short squeeze, sell orders in a bull squeeze) flood the market. This provides the manipulator with perfect, high-volume exit liquidity, enabling him to close his multi-million dollar position at a very high profit.

Secondary Profits:

Manipulators can also profit from the spot market action itself. After a pump and dump liquidates long positions, they can buy back their tokens (or even more) at a significantly reduced price. After a pump and dump liquidates short positions, they can sell their tokens to capitalize on the FOMO-driven rally. 4.2. Manipulator Risk Analysis Capital Cost: While spot market manipulation is effective, it is not without cost. Executing a pump and dump or absorbing the slippage of a sell-off requires significant capital. Exchange Intervention: Exchanges like Binance/OKX/Bitget have internal market monitoring teams. Egregious manipulation, especially if discovered, can result in account freezes, asset delistings, or investigations. Cases have shown Binance/Bitget firing investigators who exposed manipulation by major clients, highlighting the complex and sometimes conflicting environment. Counterparty Risk: This strategy assumes the manipulator is the only "whale" in the market. While unlikely with 97% control, the possibility exists that another large entity could attempt to manipulate the market in the opposite direction, potentially leading to a costly price control war. 4.3. Retail Trader Red Flags and Defensive Analysis Token Economics Red Flags (from Part I): Verify on-chain holder concentration. If the top 10 holders control over 90% of the supply, the asset is structurally compromised and carries a high risk of manipulation. Avoid tokens with very low initial circulating supply. Market Activity Red Flags (from Part II): Be wary of tokens experiencing price surges accompanied by suspiciously high trading volume without real community growth or utility. Cross-reference trading volume with on-chain transaction counts and holder growth to identify potential wash trading. Derivatives Red Flags (from Parts 2 and 3): The strongest warning sign is a sustained and rapid increase in open interest, accompanied by extreme funding rates. This suggests excessive market leverage, ripe for a dramatic "purge" event orchestrated by entities controlling spot prices. Analyzing the rate of change in open interest can be more revealing than its absolute value. By understanding the structure of this strategy—from its foundation in token economics to its execution via mark price—sophisticated market participants can better identify these elaborate traps and avoid becoming the "liquidity" manipulators seek to harvest. Knowing both the what and why. May we always maintain a reverent respect for the market.