Jessy, Jinse Finance
Everyone knows that it is a bad casino, but it is still thriving in the industry and has even become a weather vane of the industry, nicknamed "Take Me Flying".
"VC + Market Making" is the biggest label of DWF Labs, a company that has gained fame in the industry in the past two years. In the industry, everyone agrees that DWF is fake in being a VC, but it is real in making markets and manipulating the market in the name of investment.
Market makers are not "bad guys". In transactions, market makers provide liquidity for trading pairs, smooth out price differences, and match transactions between buyers and sellers. In traditional finance, market makers are regulated and the cost of doing evil is high. In the crypto industry, which lacks regulation, the cost of violating the law for market makers is relatively low.
In an industry full of chaos, the industry's judgment of success and strength has become "who has strength, who can make more money". It is in this situation that although DWF Labs has a bad reputation, there are still projects looking for it to cooperate, and a large number of retail investors are flocking to its investment and market-making projects.
However, simply blaming DWF cannot help us understand the essence of the industry. Only by studying how the "evil bookmakers" succeed can we perhaps understand the rules of success in this industry.
740 projects in two years
DWF Labs was founded in June 2022, during the bear market of the industry. Before DWF headquartered in Hong Kong, it was a high-frequency trading company.
If we review the history, we will find that DWF Labs was established before the collapse of FTX . After the collapse of FTX, a series of leading platforms suffered heavy losses, and market makers and lending became the hardest hit areas. For example, Alameda, one of the largest market makers in the cryptocurrency industry, was destroyed in this farce, and Genesis, a market maker and loan company under DCG, is also facing the dilemma of insufficient solvency.
At that time, market makers in the industry were almost shut down and market liquidity was seriously insufficient.
During the period of market confusion, DWF added liquidity to many small and medium-sized projects and gave hope to many projects and industries. As a result, it rose rapidly and completed the journey that other market makers took ten years to complete in just two years.
DWF was formerly known as VRM. Its executive founder Andrei Grachev worked at Ulmart, an e-commerce platform known as the Russian JD.com, in his early years. In 2017, he entered the crypto market and founded an organization called Crypsis Blockchain Holding in Moscow. In May 2018, he joined the Russian Association of Cryptoeconomics, Artificial Intelligence and Blockchain as deputy director of transactions. In September 2018, he became the CEO of Huobi Russia and joined DWF in December of the same year. In 2019, Russian media reported that he was involved in the $4 billion cryptocurrency Ponzi scheme OneCoin.
According to an insider of Huobi, due to ability and ethical issues, Huobi will no longer authorize Andrei Grachev to operate Huobi Russia.
In a bear market, DWF's strategy is very simple. First of all, in terms of project selection, the projects it chooses are basically old projects, even some "half-dead" projects, or projects that are greatly affected by news and emotions. When cooperating with such projects, DWF often buys coins at a discount price, promising that the project party can help it "boost the coin price." The coin price trends of the projects operated by DWF have one thing in common, which is to pull up first and then smash, and the coin price dives at a high point. Its so-called investment is nothing more than market making. This operation is a win-win situation for both the project party and DWF, because the coins are taken over by retail investors at high levels.
In April this year, Andrei Grachev said at X that DWF Labs has invested in more than 740 projects, and the number of investments has increased significantly since November 2023.
In the previous bear market, its larger "investments" included: a $60 million partnership with EOS, when it pledged to provide a $45 million EOS token purchase agreement and a $15 million commitment for EOS-based projects to accelerate growth and adoption; it announced an investment of $13.8 million in YGG; $40 million in Fetch.ai; $10 million in TON, $10 million in conflux; $331 million in RS, etc.
These "investments" are obviously inflated. An institution that incubates and invests in projects in the industry told Jinse Finance that investment institutions and project owners conspire to falsely report investment amounts for publicity purposes, which can achieve a win-win situation for VCs and project owners. This phenomenon is very common in the industry.
According to Twitter user @nay gmy's query of on-chain data, when DWF Labs announced an investment amount of more than 150 million US dollars, it only found on-chain amount data information of 65 million US dollars.
"Zhuang" wants to become a Builder
In this year's bull market, DWF Labs' investment and market-making model seems to have changed. Its investment is no longer concentrated on those "half-dead" projects. DWF is almost present in the hottest projects and the most eye-catching meme coins in the industry. DWF is no longer just investing and market-making. It also seems to start supporting the "concrete construction" of some industries.
This year, DWF purchased $12 million of FLOKI, most of which came from FLOKI’s treasury; invested $5 million in LADYS; publicly purchased 25 million GALA, and so on.
DWF seems to have a close relationship with Binance. It is reported that it is likely to be the market maker of three Binance Launchpool tokens: NFP, XAI, and PROTAL. The Wall Street Journal once published an article saying that the Binance monitoring team found that DWF was suspected of manipulating the market. After the news broke, Binance chose to fire the head of the monitoring team. It can be seen that DWF and Binance have a deep interest in each other.
Indeed, in the past two years, DWF has rapidly grown into a leading institution in the industry. Although retail investors continue to complain, most projects in the industry have the same interests as it. According to data released by PitchBook, DWF Labs is the crypto venture capital institution with the largest number of transactions in 2023.
While DWF Labs is expanding its investment and market-making territory, its business scope is also expanding. For example, in its cooperation with TON, it is not only about increasing the liquidity of its native stablecoin on the chain, but also helping TON improve its corporate services. DWF Labs has also participated in AirDao's node verification, launched POS nodes on Conflux, joined the modular Layer1 Self Chain as a validator node, and so on. Regarding such decisions and actions, Andrei Grachev said in a post at the beginning of this year, "DWF Labs is expanding POS, node and validator businesses to support the entire DeFi ecosystem, protocols and correct governance decisions. The right partnership must be based on multiple perspectives, create synergies and create value for the industry."
It seems that we can see from the above that DWF Labs wants to become an "industry builder" from a dealer. And DWF is betting heavily on the game track. At the end of 2023, it made a strategic investment in MOBOX. In 2024, it invested in game publisher Sidus Heroes and Metaverse Chain Game Project SIDUS HEROES and said that it has been looking for opportunities in the game track. Another track that DWF is optimistic about is Meme coin, which can be clearly seen from its becoming a market maker for many Meme coins. After making enough money, DWF wants to gradually whitewash itself and transform from a "dealer" to an industry Builder.
This is not uncommon in the industry. The scythe that once cut leeks now stands at the center of Hong Kong's compliance track, and the institution that once had its white paper written by others has become the public chain with the highest issuance of stablecoins...
Capital may indeed be omnipotent. However, if these institutions that have made enough money are willing to devote themselves to the development of the industry instead of disappearing from the scene, it will always be a good thing for the development of the industry. But for retail investors, if they follow the big cuts, they will always be cut.
