Market makers are considered to be key players in the financial arena, capable of masterfully extracting profits through sophisticated strategies and tactics. They create liquidity, manage risks and influence the price dynamics of assets, providing themselves with a stable income. In this article, we will look at examples of the main methods that #маркетмейкеры use to generate profits and explore their impact on financial markets and investors.
A market maker is a market participant who trades an asset within predetermined price and volume ranges to maintain stable demand in the markets.
Many are accustomed to viewing market makers solely as those who seek to deceive ordinary people and lure money from honest traders. They suggest that market makers create schemes for incorrect entries and then close on gullible traders.
Of course, big players can engage in such practices without missing out on the opportunity to use similar methods. However, the main reason why projects turn to market makers (almost all large projects work with them) is completely different.
What can market makers do?
1. Maintain the stability of the token price if it suddenly and significantly begins to be sold.
2. Ensure the availability of liquidity on exchanges (for low-liquid coins) so that users always have the opportunity to sell their tokens on the exchange, even if there are not so many buyers.
3. Artificially increase trading volumes in order to push the project, for example, to the TOP of CoinMarketCap.
Two of the largest market-making funds that provide their services even to projects from the TOP 10 CoinMarketCap are Jump Trading and Wintermute.
Let's look at their examples of what they do.
Jump Trading
Very big guys. We managed to receive charges from the SEC for manipulating UST, a year before its collapse. The SEC's official investigation clearly states that Terra hired Jump Crypto to maintain the stability of UST and Luna. It has been proven that Jump spent $62 million in May 2021 to maintain the UST exchange rate. And the fact that LUNA tokens were received at $0.4 when they were already trading at $90.
Reports, news from the media - of course, everything is interesting. But let's do our own investigation: Let's show one of the obvious examples of the impact of big money on a small project.
So, the#Ttoken is Threshold Network Token. The market maker began his work in early December. Since then, we have seen the first movements in the Jump Trading wallet associated with this token. Throughout December there is an active accumulation of positions. T tokens are transferred from Binance to the fund's cold wallet. We have highlighted this period in green on the chart.
From January 1 to January 10, withdrawals from the wallet finally became available. However, it is strange that the tokens are not returned back to Binance, but are sent to OKH (another exchange). This period is marked in yellow on the chart.
❗And suddenly there is a sharp “pump” (increase) in price by 150%.
The day after such a sharp increase, the Coinbase exchange also joins the process, and now the withdrawals go there.
This is the fund's standard operating procedure in most cases. Draw your own conclusions from the above. There are a huge number of similar examples with the actions of the Jump Trading company. Take a couple of hours to analyze their wallets and you will see for yourself.
Wintermute
The founder of one of the leading market-making funds is Evgeniy Gaevoy, a man from the CIS countries who lives in London. Let's look at what projects he and his wife Marina Gurevich have been involved in in recent years.
Let's remember the recent and loud drop of the $BLUR coin, on which many were able to make good money, and the Wintermute company actively participated here. By the way, for a project, having such a large market maker as a partner is always a big plus.
So, we see that at first 15,000,000 tokens #BLUR appear on Wintermute’s wallet. These tokens immediately go to different exchanges, not limited to one. This happens on the morning of February 14 (the drop took place in the evening of that day).
It is not known for what purpose transactions were made for the 1st BLUR token on different exchanges (marked with a gray-green square on the screen), but perhaps this was done to check the speed of transaction processing by exchanges.
As soon as trading began, a second batch of 7,500,000 tokens was immediately put up on the exchanges. I'm guessing they were added to the glass from the start, at a cost of about $3-$5 per coin.
What happened next... Probably, the market maker, using the proceeds, bought back tokens at a price of 0.6-0.7 dollars, thus maintaining the price and not allowing BLUR to fall below the level of 0.6 dollars. It is for such price support and to prevent the token from falling to levels below $0.6 that projects need market makers.
About a day after the first actions, we notice how Wintermute’s wallet is replenished with millions of BLUR tokens from different exchanges, most likely purchased at a price of 0.6-0.7 dollars. Due to the lack of ability to track their transactions within exchanges, we can only speculate (with high probability) about the actions of this fund.
By the way, I would advise you to do your own research on the APTOS coin drop. There the situation is even brighter and more interesting. The strategy is similar:
All coins received by participants as a result of the drop are bought back at low prices, which leads to an increase in price.
People see growth and hope for further price increases. Even those who have already sold their tokens immediately after the airdrop are going to buy them back at a higher price, hoping for even greater growth.
As a result, the price falls even lower than the level from which the increase began. Regular traders suffer losses while market makers continue to gain positions at very low prices.
Market makers are in no hurry to help only small projects. One of the key saviors #Binance was the Wintermute fund on December 13, 2022. Do you remember the flash crash that happened then? This was due to criminal cases, suspected money laundering and other reasons. As a result, the vast majority of users ran to withdraw their money from Binance. Many feared a repeat of FTX's fate. Perhaps this would have happened if it were not for the quick finding of funds to pay CZ users.
At that moment, Wintermute rushed to the rescue. Look at the transactions on their wallet for December 13, and you will see how they decided to help in this situation.
❗For some reason, the fund of a woman from Siberia and a guy from Moscow replenishes Binance with a total of $300 million right in the midst of a fad and a massive withdrawal of funds from the exchange. And this was not some regular, scheduled payment.
All the examples presented above can be considered only a small part of what these funds actually do. They not only keep projects on schedule, saving them from collapse and other problems, but also actively influence the direction of price movements.
I recommend taking a closer look at how their wallets work for other coins and comparing them with price charts. If you keep an eye on their wallets, you will often notice how the Wintermute fund deposits money into the exchange before sudden pumps or dumps of any coin.
It is also important to monitor the activity of the founders of these funds on social networks. It is imperative to observe the thoughts and comments of such significant players in the market.
Market makers can be faced with various tasks, for example, the task of extinguishing pumps - that is, situations where the price of a token rises rapidly within one hour, and then sharply falls in the next hour, returning to its previous level. This is a typical task for market makers. It does not always occur, of course, but it often occurs, especially during a bear market, when investors are actively taking their profits.
In this situation, the task of market makers is to prevent investors from locking in their profits, that is, to prevent their sale at high prices after the pump and keep the value of the token at a more stable level.
Insider trading
You may know that about six months ago, #dYdX moved the unlocking of its tokens (worth $350 million) from February to December. They just suddenly changed the unlock date. All documents and announcements previously pointed to an unlocking in February.
The dYdX team, of course, expected that such a positive update about the postponement of the unlock would lead to an increase in the value of the coin. But here’s the problem: a day before the official announcement, someone actively began buying dYdX tokens, apparently having information about the upcoming news.
And it is likely that the characters from the previous paragraphs had inside information. After all, both Jump Trading and Wintermute actively support dYdX with their money.
In the morning we collect baskets for $1.5, in the evening we leave for $2.2.
What to do?
Now that you understand who can control price movements in the market, the question becomes what to do with this information.
It is recommended to carefully monitor the wallets of large funds and players. A service such as Nansen is often used for this, but it can be relatively expensive. There are also several Telegram bots that you can enter wallets into and they will send notifications about any movements on them.
Before buying or selling project tokens, it is worth finding out about the presence of market makers in them and assessing their influence on the market. For example, in the case of BLUR coin, knowing that Wintermute was outside the project could influence your decision to dump tokens immediately at a low price or wait for a pump in the long term (which is what ultimately happened).
And, of course, always be on your guard and remember the basic rule of the market: everyone wants to make money. This applies to the founders of all projects in which you participate, as well as funds and other major players. If they have a good opportunity to take advantage of your market movements or outwit you, they will do so. Their multi-million dollar accounts will once again increase due to your deposits.
Apart from those who manipulate charts with large amounts of capital, there are also those who influence the market through news, headlines and media. Elon Musk is an example of such a player who can pump up any cryptocurrency with one post. There are many news reports that immediately appear as soon as Bitcoin crosses some “important” price level. A relentless PR marketing assault, statements about the future of cryptocurrencies and predictions that 100% of the population will start using Bitcoin to spur its growth and force people to urgently purchase this coin. The people who are behind the organization of such things can also be called market makers. They use other tools, but that's a completely different story...
We invite you to discuss the article in the comments and offer examples for future investigations of projects that may be of interest to you.
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