From the perspective of God, the controversial crypto market maker DWF Labs

Whether it's the primary market or the secondary market, every day is filled with stories of getting rich quick. However, it seems like you can never become the "hero" of these stories. Sometimes, you might not even become a supporting character and end up as cannon fodder.

Most people don't come here to seek value investments, but to turn their fortunes around. Suddenly, one day, we see immortals fighting, the market surrounded by conspiracy theories, and you start to doubt whether they took your money and prevented you from turning your fortunes around. And the closest to the money in the crypto market, the top predators directly involved in trading—market makers, have inevitably become the object of market hatred.

This kind of sentiment has never ceased, whether it's a bear market or a bull market. For example, DWF Labs, which invested in 470 projects in 16 months after its debut, it was fine to invest in so many projects, but then they said they didn't lack money, didn't need financing, and the investment money was all earned by themselves. Well, this offended quite a few people, such as market makers who raised funds. Just like Captain Jack Sparrow in "Pirates of the Caribbean," he offended everyone in the sea and on land, and everyone who saw him wanted to give him a beating.

Cunning, full of tricks, market manipulation, pumping and dumping, taking advantage of others, these are the synonyms for crypto market makers. But before labeling market makers with various accusations, as a "senior leek" in the industry, as someone who has already learned to "rationally" analyze as a "senior leek," we still need to recognize the important role of market makers in the crypto market, especially in early coin listing projects.

This article explains what market makers are, why the market needs market makers, the DWF event, and its impact on the industry from the perspective of a "senior leek" (God's perspective).

I hope this article, like Captain Jack Sparrow in the coin circle, makes everyone want to give me a big hug. At the same time, I also welcome the gods with the same perspective to come and discuss.

From the perspective of God, the controversial crypto market maker DWF Labs

I. The Market Cannot Do Without Market Makers

Many people have been in the industry for a long time, but they don't know what market makers are, why there are market makers, and some people even consider market makers as manipulators because some of their actions may be seen as attempts to influence or manipulate market prices. Just like how all sailors think that seeing the "Flying Dutchman" means death.

It should be noted that the "Flying Dutchman" does not cause death at sea; it has a specific job, which is to transport souls at sea and allow sailors to be reborn.

From the perspective of God, the controversial crypto market maker DWF Labs

Similarly, not all market makers are terrifying. Encountering one does not mean they want to take advantage of you. Market makers also have their job content. They play a crucial role in market liquidity and capital efficiency, and some tokens without liquidity can become active immediately with the help of market makers.

Like the "Flying Dutchman," many people cannot see its face. Market makers are the same, seemingly hidden in a corner of the crypto world, elusive, and no one will see them at first glance. They only appear where there is a need for funding for projects, where there is a lack of liquidity in the secondary market, and where there is profit potential.

You might be more confused now, saying market makers are market makers, why talk about Captain Jack Sparrow one moment and the "Flying Dutchman" the next. This is a metaphor to highlight the importance of market makers in the crypto world. They are the hidden things in the crypto world. If institutions don't point them out, we won't notice them intuitively.

Now let's understand what market makers are together.

(I) What Are Market Makers?

Since the concept of finance emerged, corresponding financial "markets" have been established, and the most important thing in finance is liquidity. Liquidity is the force that keeps the entire financial system running smoothly; the ability to buy and sell assets quickly and effectively is crucial for traders, investors, and the entire market.

On average, Nasdaq has 14 market makers for each stock, with a total of about 260 market makers. In markets where liquidity is not as good as stocks, such as bonds, commodities, and foreign exchange, most trades are conducted through market makers.

Market makers contribute significantly to reducing volatility and trading costs by providing ample liquidity, ensuring efficient trade execution, enhancing investor confidence, and facilitating smoother market operations.

From the perspective of God, the controversial crypto market maker DWF Labs

In the crypto industry, market makers refer to institutions or individuals that provide liquidity and buy/sell quotes for projects in crypto trading. Their main responsibility is to provide liquidity and market depth for trading in one or more crypto markets, and to profit from market fluctuations and supply-demand differentials through algorithms and strategies.

Like traditional markets, clear rules for market-making activities are crucial for the proper operation of the crypto market. Crypto market makers not only reduce trading costs and improve trading efficiency but also promote the development and promotion of new projects.

From the perspective of God, the controversial crypto market maker DWF Labs

In short, market making is providing bid and ask quotes to any given market, providing market scale for both buyers and sellers; without market makers, the market will relatively lack liquidity, which will hinder trading convenience.

(II) Crypto Market Makers vs. Traditional Finance

The business of market makers in the crypto market is fundamentally similar to traditional finance, but there are significant differences in operational mode, technology, risk management, and regulation:

First, the scale of market makers in the crypto industry is relatively small;

Second, the liquidity of the crypto market is relatively low, and there is greater volatility, so market makers need to be more cautious in risk management;

In addition, because the trading process in the crypto market is difficult to regulate and there is no strict market maker system to constrain, the relationship between exchanges, projects, and market makers becomes more complex.

Lastly, in terms of technical architecture, the crypto industry needs to have higher technical capabilities to ensure the security of transactions. Market makers use various trading strategies to provide liquidity and make profits. Some of these strategies include statistical arbitrage, order flow trading, and market-neutral strategies. These strategies aim to exploit market inefficiencies and price differentials.

(III) Why Do We Need Market Makers

(1) Provide Adequate Liquidity

The main goal of market making is to ensure that the market has sufficient liquidity. Liquidity refers to the ability to quickly and easily convert assets into cash without causing financial loss. High market liquidity can mitigate the impact of trading costs on any trade, minimize losses, and allow for the efficient execution of large orders without causing significant price fluctuations.

Essentially, market makers help investors to buy or sell tokens more quickly, in larger quantities, and more easily at any given time without causing significant interruptions.

From the perspective of God, the controversial crypto market maker DWF Labs

For example, if an investor needs to buy 40 tokens immediately, they can buy 40 tokens at a price of $100 each in a high liquidity market (Order Book A). However, in a low liquidity market (Order Book B), they have two options: 1) buy 10 tokens at $101.2, 5 tokens at $102.6, 10 tokens at $103.1, and 15 tokens at $105.2, with an average price of $103.35; or 2) wait for a longer period for the tokens to reach the desired price.

Liquidity is crucial for early coin listing projects, and operations in low liquidity markets will affect investors' trading confidence and strategies, and may indirectly lead to the "death" of projects.

(2) Providing Market Depth and Stabilizing Token Prices

In the crypto market, most assets have low liquidity and lack market depth, and even small trades can cause significant price changes.

In the scenario mentioned above, after the investor buys 40 tokens, the next available price in Order Book B is $105.2, indicating a price fluctuation of approximately 5% from a single trade. This is especially true during market volatility, where fewer participants can lead to significant price fluctuations.

Market makers provide ample liquidity, resulting in narrow bid-ask spreads in the order book, which are usually accompanied by solid market depth, helping to stabilize token prices and mitigate price fluctuations.

Market depth refers to the available quantity of buy and sell orders at different price levels in the order book at a given time. Market depth also measures the ability of assets to absorb large orders without significant price changes.

Market makers bridge this supply-demand gap by providing liquidity, playing a crucial role in the market.

Looking at the market-making recruitment released by exchanges, it also confirms that the market cannot do without market makers.

The activities provided by trading platforms for market makers indirectly confirm that the industry cannot do without market makers.

The activities provided by trading platforms for market makers indirectly confirm that the industry cannot do

(1) DWF Labs Prequel - Founder's Rise to Prominence

The co-founder and public face of DWF Labs is Grachev. Although Grachev, a Russian, primarily operated in Europe in the early days, he has deep connections with Huobi (now HTX) and OKX in Asia, giving DWF Labs access to a high level of networking resources in Asia. This is evident in the hundreds of projects in Asia that DWF Labs has invested in, which is closely related to Grachev's early incubator work. This also explains why DWF Labs operates as both an investment institution and a market maker.

DWF did not gain much attention in 2023, and its parent company, Digital Wave Finance, remained low-key in Europe and the United States. It wasn't until September 2022, when Grachev established DWF Labs in Singapore, that the market was in a state of confusion following the closure of FTX and its affiliate Alameda. DWF Labs, at that time, seemed like a savior, bringing hope to many potential projects.

This article is not finished here. This is a comprehensive analysis of the WEB3 era, so let's take a look at how DWF Labs co-founder Grachev has driven the prosperity of the global primary and secondary markets.

Looking at Grachev's history and the opportunities for DWF Labs according to the timeline:

(1) Origin of DWF Labs - Operation of Huobi Russia

Grachev was born in Uzbekistan and studied organizational management at Orenburg State University before working as an oil trader for two years. In 2016, he entered the cryptocurrency field by operating a small mining farm and engaging in personal trading.
In 2018, at the age of 30, Grachev became the CEO of Huobi Russia, overseeing the launch of Huobi Russia. Huobi Russia was the local exchange officially authorized by Huobi Global (now known as HTX) through its cloud program.
While the preparation for Huobi Russia's launch was not difficult, Grachev faced the challenge of liquidity. He realized the significant impact of liquidity on the exchange's profitability and managed to secure favorable rates for a small Swiss high-frequency trading (HFT) company to access Huobi's liquidity through the Russian agency.
On December 8, 2018, when Huobi Russia officially launched, the trading volume reached $10 million, and the next day, it increased to $22 million. Grachev, now a marketing master, began promoting Huobi Russia.

This HFT company brought Grachev to prominence, attracting attention and scrutiny from the entire cryptocurrency community. Later, he became involved in over 400 projects and mobilized hundreds of millions of dollars. This company would later be known as DWF Labs, and this is its origin story.

(2) Establishment of Digital Wave Finance

Three days after the official launch of Huobi Russia, the HFT company established Digital Wave Finance in Switzerland, primarily engaged in market making and proprietary trading.

This high-frequency trading company, established on December 11, 2018, by the Schweizer brothers, Marco and Remo, and Michael Rendchen, focused on spot and futures trading. By the end of 2020, Digital Wave Finance had accumulated $50 million in capital.

(3) Grachev's Post-Huobi Era

During his tenure at Huobi Russia, Grachev met Zac Zou, the regional marketing director of OKEx (now OKX).

Before the closure of Huobi Russia, Grachev established a Latvian entity called Vroom and launched a website called VRM Trade. One of the main strategies of the website was to incubate other trading companies and discover talent.

This may be the reason why Grachev later became a co-founder of DWF Labs and the incubation work it undertook.

During the period from 2020 to 2012, Grachev had the closest contact with Digital Wave Finance. Due to his connections in China, he helped Digital Wave Finance integrate with other exchanges and obtain low fees. The high-frequency trading company was responsible for token trading on major exchanges, while Grachev interacted with the exchanges and handled token trading on smaller exchanges.

At this point, Digital Wave Finance was operating on more exchanges and had a high level of operation across the board. It had a VIP 7 level on Bitfinex and OKEx and a negative maker fee on at least 7 exchanges.

This level brought significant benefits, such as a maker fee of -0.002% and a taker fee of 0.0157% on Binance. These low fees allowed market makers to provide continuous liquidity to the exchange.

(4) Establishment of DWF Labs

In June 2022, the VRM Trade brand was abandoned, and Grachev established a new entity for DWF Labs in Singapore, which would take on the public image of Digital Wave Finance. Grachev, the Schweizers, and Rendchen were the initial shareholders.

In September, DWF Labs officially launched, bringing a proactive company to the market, with Grachev's personal brand attracting attention wherever it went.

(5) Growth of DWF Labs

In January 2023, Zou (former OKEx member), Heng Yu Lee, and Ng (former Gemini member) also became shareholders of the new entity of DWF Labs in Singapore.

Ng is a co-founder of OpenEden, a company whose funds are managed by a registered fund management company regulated by the Monetary Authority of Singapore and collaborates with Zodia Custary, the cryptocurrency department of Standard Chartered Bank. According to the OpenEden website, Darley Technologies' investment arm, Darley Labs, is also an investor in OpenEden.

In February 2023, Sylvain Barbezange, who was the OTC trading director at Darley Technologies, moved to Digital Wave Finance to serve as the institutional director.

From the talent structure of DWF Labs, it can be seen that although DWF Labs is a new company, its co-founders are experienced high-end talents in the cryptocurrency industry. This makes it easier for DWF Labs' incubation department to discover better potential projects, giving DWF Labs the confidence to excel in venture capital.

The company is launching its first incubation program for cryptocurrency companies and plans to create a compliant market for over-the-counter cryptocurrency trading, as mentioned by Grachev.

With the financial support of Digital Wave Finance and the extensive network established along the way, DWF Labs has the ability to become a significant force in the cryptocurrency field in the near future.

(II) Investment Returns of DWF Labs

DWF Labs believes that the turbulent market is the best time to enter the investment field. Therefore, after the collapse of FTX in 2022, when the market was in a downturn, DWF Labs quickly expanded into the primary and secondary markets, investing in hundreds of projects. This strategy proved effective, as they have accumulated enough profits to invest in projects.

According to the official website, "DWF Labs invests in an average of 5 projects every month, regardless of market conditions." As a company primarily engaged in market making and high-frequency trading, let's take a look at their performance.

In selecting market-making tokens, DWF Labs primarily targets East Asian projects and various new and old emotional themes. Currently, there are 140 tokens associated with DWF Labs, with a total market value of $64,026,720,062.54. Over the past 7 days, the average price fluctuation of DWF Labs' narrative tokens has been 9.1%, with MRST, ORT, and JASMY performing the best during this period.

The data platform Cryptorank shows that from September of last year to the present, DWF Labs' comprehensive ROI for primary market investments is 3.54%, with investments ranging from $3-100 million. Their main investments are in the Ethereum ecosystem, DEX, metaverse, gaming, and privacy sectors, placing them at a level 2 in the investment bank hierarchy.

Among their investments, there is one project with a 50x increase, two with a 25x increase, and three with a 10x increase, with most projects yielding a final return of 5x.

The project with the highest increase is Fetch.ai.

The seemingly unremarkable returns are due to the dynamic nature of the data platform. When some projects experience a decline, the overall returns are diluted. Additionally, many projects have completed a full market cycle or are in an adjustment period.

By examining any project, such as Fetch.ai, we can see its historical increase, with Fetch.ai showing a 807.3% increase over the past year, indicating that DWF Labs has its own unique approach to selecting investment targets.

(III) Recent Investment Direction of DWF Labs

DWF Labs has consistently chosen 5 tokens to invest in each month. In June, DWF Labs set its sights on the meme coin market, aiming to capitalize on the "comeback" trend.

DWF Labs made a high-profile entry into the meme market, with co-founder Andrei Grachev announcing plans to invest more funds in meme projects such as $LADYS and $FLOKI, with three other projects currently in discussions.

After DWF Labs purchased $FLOKI on June 4th, the token broke its all-time high on June 5th, reaching a 45% increase.

On June 3rd, DWF Labs invested $5 million in $LADYS.

Following DWF Labs' investment in $LADYS, the market response was not as significant as with $FLOKI, with a 4.16% increase in the past 7 days. It remains to be seen if this presents an opportunity.

(IV) About $LADYS

The Milady project was launched on May 5, 2023, and is related to the Milady NFT series, with its token named $LADYS. It is available for all PEPE token and Milady Maker NFT holders to claim $LADYS.

As per the official statement:

"$LADYS is a meme coin with no intrinsic value or expected return, and it is not associated with Charlotte Fang or her creation, Milady Maker. It is simply a tribute to a meme that we all love and identify with. This project has no formal team or roadmap and exists solely for entertainment purposes."

(1) Token Information

Project Name: Milady
Token Name: Milady Meme Coin ($LADYS)
Circulating Market Cap: $217,114,922.00
Market Cap Rank: 301
Fully Diluted Market Cap: $217,114,922.00

(2) Token Distribution

$LADYS is mainly concentrated in:

Centralized exchanges: 57.96%
Large holders: 22.29%
Medium holders: 6.95%
Project/smart contract: 4.75%

(3) Bullish Indicators for $LADYS

Narrative: LADYS belongs to the Meme narrative, with a total of 614 actively running tokens in the Meme sector, with a total current market value of 68,346,212,796.40. The average token increase in the sector over the past 7 days has been 3.1%.

Above the controversial cryptocurrency market maker DWF Labs

The recent 7-day increase for $LADYS is -2.39%, indicating a recent price weakness for $LADYS. This also suggests that the market has not fully recognized its potential value. $LADYS may have other advantages or untapped potential, serving as a catalyst for future growth.
From the funding rate perspective: The current funding rate for $LADYS on Bybit (futures) is 0.06%, indicating more long positions, reflecting a bullish market sentiment as traders are willing to pay a 0.06% fee to short traders. The total open interest contract value is currently $18,763,223.56, with a trading volume of $11,190,797.76 in the past 24 hours.

(4) Neutral Indicators

BOLL Indicator: Currently, the price of $LADYS is in the middle and upper range, indicating relatively strong recent performance, with the middle line possibly serving as support and the upper line as a short-term target.
RSI: The current RSI is 54.89, indicating a neutral market condition with no clear overbought or oversold signals.

Above the controversial cryptocurrency market maker DWF Labs

At this point, this lengthy article is basically concluded. DWF Labs is a controversial emerging market maker, operating with its unique "venture capital + market making + incubation" model, which was previously unimaginable in market makers. Therefore, there is currently considerable controversy.

DWF Labs is like Captain Jack Sparrow in "Pirates of the Caribbean," always doing things unconventionally, offending many people on the sea and on land, with everyone wanting to give him a piece of their mind. However, others have real skills, so he has gained a large number of "brain-dead fans."

In written explanation, DWF Labs is a shark in the industry, and the controversy surrounding DWF will not stop. It can be foreseen that in the future, it will only intensify. Some people believe that DWF Labs is an innovative pioneer in the crypto industry, while others believe they are reapers, creators of market instability.

Regardless of the perception, as a member of the industry, we are here to turn things around and should not be easily led astray. I always believe that what most people don't understand has greater potential.

In early June, DWF Labs gave us a clear signal, with three projects currently in negotiations. According to industry conventions, when they make an official announcement, it is when they have quietly entered the market. So, if you want to follow suit, you need to track on-chain and make money when the official announcement is made.

References:

https://www.prestolabs.io/research/market-making-predatory-or-essential

https://news.marsshare.cc/20231222113456020809.html

https://foresightnews.pro/article/detail/43411

https://www.wikibit.com/zh-cn/202310292534493947.html

https://www.chaincatcher.com/article/2123653

https://www.coindesk.com/business/2023/04/14/market-maker-dwf-labs-more-than-200m-in-deals-blur-what-investing-means/

https://medium.com/hindsight-series/dwf-ventures-investment-thesis-2023-c08486bcc0d0

https://x.com/DWFVentures/status/1798180455482884424

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