The "Stepping Stone" of the ICO Era: The Rise of the First-Generation Market Makers
In the early days of cryptocurrency, when the ICO (Initial Coin Offering) boom swept the globe, market makers quickly emerged, becoming the behind-the-scenes driving force for project success.
At the time, if a project wanted to raise funds from investors or list on an exchange, it was almost impossible without the "services" of market makers. Their prices were high, ranging from $50,000 to $300,000 per month or even more. On the surface, this was a liquidity fee, but it was more like a pass - without their endorsement, large investments were difficult to secure, and exchange doors remained closed.
The role of market makers was simple yet crucial: by placing orders on the order book, they injected liquidity into the market, ensuring smooth token trading and adding "credibility" to the project. This model was prevalent during the ICO boom, with many projects successfully raising funds, and investors were happy to see active trading charts.
However, this dependence quickly turned sour. By the end of 2017, Binance began frequently clearing out problematic market makers, who were no longer satisfied with being "servers" and instead turned their attention to more direct profit sources. They discovered that manipulating tokens was more profitable than honestly maintaining the market. Thus, the evolution of market makers officially began, gradually transforming from assistants to market manipulators.
The Battle of Wash Trading and Options: The Awakening of Market Makers
After the ICO boom subsided, market makers did not exit the stage but instead underwent their first major technological and strategic evolution.
Initially, their trading methods were crude. On first-tier exchanges like Binance and Kraken, they were somewhat restrained, but on third-tier platforms, they brazenly engaged in self-trading and wash trading to create fake trading volumes. This "prosperous" scene attracted more attention and paved the way for project valuation and subsequent selling. Binance repeatedly intervened to clear them out, but it was difficult to completely curb this trend.
As the market matured, market makers upgraded their strategy to a bullish options model. This structure was reportedly driven by institutions like Jump, with the theoretical basis that assets with strong liquidity are more valuable, and token prices can achieve steady growth through options operations. However, the actual implementation deviated from the original intent.
Many market makers used options as a withdrawal tool: first raising the price, exercising options to cash out, and then clearing out, leaving chaos in their wake. This "pump and dump" model was particularly deadly in markets with insufficient depth. For example, in March 2025, GoPlus Security (GPS) and MyShell (SHELL) tokens plummeted 80% and 50% respectively after listing, with operators behind the scenes cashing out tens of millions of dollars through short-term selling, with a sophistication that was remarkable.
During this period, market makers had transformed from "service providers" in the ICO era to "traders," with their goal no longer being to maintain market stability, but to directly profit from information asymmetry. The options structure became their weapon, with retail investors becoming the most common sacrificial lambs.
The Peak of Low Float: SBF and the Market Makers' Harvesting Frenzy
The emergence of SBF (Sam Bankman-Fried) marked another turning point in the evolution of market makers, as he introduced the low float strategy that pushed manipulation to new heights.
In this model, token circulation was deliberately compressed, making prices easily manipulable and causing bullish option values to skyrocket. More complexly, this structure often came with hidden loans, allowing market makers to first sell tokens to crash the market, then repurchase at low prices. If prices rose, they would cover with options; if they fell, they would sell the initial large liquidity and abandon the options.
The most extreme approach was: short at high positions during listing, repurchase at the bottom, then raise prices in a low-liquidity market, exercise options and sell again, in a continuous cycle. This strategy was particularly common during TGE (Token Generation Event). In December 2024, the Movement (MOVE) token experienced a flash crash the day after listing, with 66 million tokens sold, representing 3.11% of circulation, with almost no buy support. Three months later, the involved institution's $38 million profit was frozen by Binance. This institution, Web3port, had a clear operational path: precisely selling from the 70 million tokens allocated by the project party at the peak of sentiment, epitomizing low float harvesting.
At this point, market makers no longer concealed their intentions. They even sold tokens at discounted prices to liquidity providers before TGE, demanding bids, while handing large token amounts to "exit strategy" operators to sell during price increases, directly leaving retail investors at high positions. From the SBF era, market makers completely abandoned the "service" label, evolving into "hunters" in the market.
From Covert Manipulation to Direct Harvesting: Web3port and the Ultimate Form of Modern Market Makers
Entering 2025, market makers' evolution reached a new stage, transitioning from covert manipulation to "direct harvesting," with Web3port embodying this trend.
The standard for excellent market makers should have been: quoting near the mid-price, increasing depth, and maintaining neutrality. However, in reality, many players had long abandoned this principle. Synthetix was an early victim, with DWF Labs purchasing tokens from its treasury, raising prices and then selling, profiting short-term while damaging the project's long-term value. Web3port took this model to the extreme.
In March 2025, Binance consecutively exposed Web3port's operations in GPS, SHELL, and MOVE projects. Their pattern was consistent: obtaining low-cost tokens through project token agreements, creating a liquidity illusion in the initial listing period, then concentrated selling. In the MOVE incident, Web3port's sale of 66 million tokens, earning $38 million, was frozen; GPS and SHELL saw cash-outs of tens of millions of dollars, with prices crashing and retail investors left with nothing. Although the Movement Foundation attempted to repurchase tokens with frozen funds to self-rescue, it could not mask the potential tacit understanding with market makers.
The root of this "direct harvesting" model lies in industry unwritten rules: exchanges require market maker endorsements, project parties provide token discounts, market makers cash out by selling, forming a closed loop with capital exit. The regulatory vacuum makes violations low-cost, and while Binance's clearing actions are progressive, they cannot touch the fundamental issue.
From the "stepping stone" of the ICO era, to the awakening of options trading, to the harvesting frenzy of low float, and now "direct harvesting," the evolution of market makers is a history of transformation from service to predation. Investors should be highly vigilant if they see large token amounts flowing to "market makers," demanding transparency for self-protection. Only by thoroughly reforming token distribution and access mechanisms can the crypto market escape this shadow.
