PANews reported on April 17 that according to Cointelegraph, some market makers are turning token loans into a profit machine, pushing small crypto projects into a death spiral. It is understood that a market maker model called the "loan option model" involves project parties lending tokens to market makers, who then use these tokens to provide liquidity, stabilize prices, and assist projects in listing on crypto exchanges. However, behind the scenes, some market makers are exploiting this controversial token loan structure for their own benefit, with these agreements often packaged as "low-risk, high-return" but actually severely impacting token prices and throwing nascent crypto teams into chaos and struggle.
Ariel Givner, founder of Givner Law, stated, "The way it works is: market makers borrow tokens from project parties at an agreed price, and in exchange, they promise to help these tokens list on major exchanges. If they fail to fulfill their promise, they need to repay these tokens at a higher price within a year." But in reality, what often happens is that market makers sell the borrowed tokens, triggering an initial price crash. After driving down the token price, they then repurchase the tokens at a low price to profit.
