A recent study reveals that around 78% of Initial Exchange Offerings (IEOs) of crypto tokens are manipulated by market makers. This practice raises serious questions about the integrity of the listing process and its implications for traders and hodlers.
Price manipulation, a common practice
The careful analysis of 93 initial exchange offerings, or IEOs, since April 2024 highlights questionable practices of wash trading and pump and dump.
According to metric of the Relative Change in Volatility (RCV), 69.9% of listings are classified as “parasitic” and 8.6% as “transient”. These malicious strategies significantly distort price discovery, harming token holders and compromising the tokenomics of projects.
In parasitic listings, Market Makers orchestrate artificial liquidity to inflate initial prices. This manipulation thus leads to a spectacular pump followed by a brutal dump, trapping many FOMO buyers who find themselves with devalued tokens.
Transitory listings, for their part, are characterized by a deliberately unbalanced order book, exclusively benefiting market makers to the detriment of the token ecosystem and its community.
Towards strict regulation of crypto listing practices
Faced with these worrying red flags, an in-depth overhaul of listing protocols is urgently needed. Exchanges and token issuers must demand full transparency from Market Makers. The systematic implementation of detection tools such as RCV would make it possible to identify and severely sanction market manipulation.
Actively promoting “symbiotic” approaches – which unfortunately only represent 21.5% of IEOs studied – is crucial for the future of the sector. These virtuous methods ensure fair price discovery and promote sustainable market engagement, benefiting the entire DeFi ecosystem.
The crypto industry must urgently restore trust by drastically improving the integrity of listings. Only concerted and determined action by all stakeholders will make it possible to build a fairer and more sustainable market. The credibility of the sector and the protection of all participants, from influential whales to vulnerable small investors, depend on it.
In short, the crypto community is at a crossroads. It must choose between letting these toxic practices continue or working collectively for a more transparent and ethical ecosystem. The future of IEOs and investor confidence depend on it.
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