Recently, I saw someone asking how to exclude market maker transactions to discern the real trading volume of projects listed on exchanges.
Seeing this question, the first thing that comes to my mind is, if market makers have become the volume boosters, have they lost their meaning of existence?
As we all know, there are numerous matrix accounts on Twitter, and countless bots. While everyone deeply detests fraudulent behavior, what they seek is a relatively authentic ecological environment. However, where there is demand, there is a market. This behavior is only criticized by everyone, but there are no particularly good solutions.
Thinking from a different perspective, the data generated by bots satisfies the project parties, makes intermediaries happy, and allows bots to make money. It’s a triple happiness. As for how much market response such behavior can bring, I think it’s negligible. The purpose of advertising is no longer just to promote products, but purely for advertising's sake. However, this behavior still requires the market to pay for it, and the payers will be those inexperienced newcomers, who might even euphemistically call it paying tuition. This tuition, in my opinion, is unnecessary.
So what is the difference between market makers and these kinds of matrix accounts?
I went to grok: Market Maker.
Refers to institutions or individuals that facilitate trading in financial markets by providing buy and sell quotes. Their main responsibility is to continuously quote bid prices (Bid) and ask prices (Ask), providing liquidity to the market, ensuring that investors can buy or sell assets at any time.
The main market responsibility of market makers in CEX is to provide liquidity through order placement, ensuring smooth market transactions. However, many market makers in CEX exchanges currently act as volume boosters, making the data of newly launched projects look good through buy and sell transactions. Often, the trading volume of the same project listed on two different exchanges can differ by dozens of times, which is indeed very misleading. What benefits does this behavior bring? Will it make the market pay? Will it bring positive returns to the project?
The liquidity provision in DEX involves adding liquidity pools (LPs). Based on some projects I have participated in, there have indeed been integrations with market makers, and their service is solely about boosting volume. If we remove the volume boosting by market makers, many projects might suffer severely, as many inexperienced investors cannot discern this, and it is indeed difficult to tell on-chain. Projects with market makers are actually considered relatively good projects.
But for now, market makers are essential to the market. The initial proposal to add liquidity pools (LPs) was to replace traditional market makers. Therefore, the behavior of market makers should return to its essence, which is to provide liquidity for projects. They should not become accomplices of project parties in wrongdoing, misleading investors through 'washing' or fake trading volumes.
A decentralized market driven by the community and actual demand, with natural liquidity, is the true decentralized trading. False prosperity cannot bring positive development to the overall circle. This year, everyone has gradually begun to lean towards on-chain trading, including the popularity of on-chain contract exchanges like Hype and the gradual entry of on-chain abstractions into users' view. Authenticity is the ultimate choice for this market.