If both GPS and Shell encounter market maker issues, it is not an exception, and this is clearly the tip of the iceberg of industry problems. To talk about the issue of market makers, we first need to talk about the operational mechanism of market makers. The market making business of a market maker is to provide quotes to both buyers and sellers, maintaining market liquidity and relative price stability. In traditional markets, there is not much profit or loss in this part, and the same is true in the cryptocurrency market. Therefore, exchange incentives, transaction fees, and project rewards are needed to subsidize (or allocate funds to spot) normal Delta One market making transactions and losses are very normal. In addition to paying transaction fees, CME or Eurex in foreign commodity markets also offer additional incentives. Otherwise, market makers may not earn much or earn less. That is to say, "profitable market making institutions" may all be engaged in market making, rarely in market making. But equally, the market also urgently needs market makers. Without market makers, the slippage in the market is huge, and no one trades, so it is usually the exchange or the target party that subsidizes this part of the liquidity. 2. The core reason why market makers lose money is that they earn the price difference, but they are very afraid of a unilateral drop in prices. And there is a commonality in the current cryptocurrency market, where there are a large number of directly unlocked sell orders during TGE, while retail investors generally no longer accept orders. After the launch, there was mostly selling and selling pressure, which contradicts the project's intention to increase shipments during the launch. ———————————————————————— The real situation of GPS and Shell When most people in the market are selling, the market maker, as a maker, will be constantly traded (forced to buy at a low price), resulting in a backlog of the underlying asset (inventory) in their hands. If the price continues to decline, the subject matter (inventory) will continue to shrink. This belongs to the unrealized loss of market makers 2. The difficulty of dynamic adjustment by market makers Market makers may lower the acquisition price (such as rapidly dropping from $1 to $0.8), but if the market crashes too quickly, there is simply no time to adjust. During market downturns, market makers tend to be more passive in placing orders for the underlying asset. The collapse of GPS was a rapid drop from 0.14 to 0.07, and from the results, it is not a benign market behavior. Market makers cannot make profits from accepting and selling orders, and unrealized losses have sharply increased. The current selling price in the market is much lower than the average cost price of the subject matter. 3. So what would a market maker do if they don't have expectations for buying and potential selling? Just like before when Trump and Milai issued coins, providing unilateral liquidity, only releasing coins, not U. Buy, sufficient liquidity; Large scale sales with extremely poor liquidity. And here is a small Tricks, where the tokens held by the project party have no cost, and the allocation of funds (U allocation) by the market maker is the actual cost. So here, if it is disclosed that @ GSR_io is the market maker of the problematic project, it is seriously betrayed by the "active market maker" and it is also a victim. (Note: Passive market makers of cryptocurrency projects often allocate equal amounts to the underlying assets, which is equivalent to OTC buying the project's tokens.) Where are the costs of market makers? The difficulty and professionalism of market making business are extremely high, and it is a fact that exchanges rely heavily on external market makers. So how do exchanges constrain market makers? Often, when market makers sign contracts with exchanges, they need to provide a deposit to the exchange. When there are market making problems (such as excessive insertion or large fluctuations), the exchange will deduct the deposit to compensate the corresponding investment victims. (Note: The Heaven and Earth Needle of altcoins is obviously a manifestation of market makers' failure to manage liquidity well) ———————————————————————— Why are market makers still doing evil in the GPS project? The market has entered a stage where retail investors no longer accept new coins, and the selling orders after listing on the exchange are obviously greater than the buying orders. Traditional market making business cannot allow market makers to make money, and if they engage in malicious cash out (with unilateral liquidity added), the amount that can be cashed out is obviously greater than the margin on the exchange. They will be willing to accept the punishment of Binance deducting margin and engage in large-scale cash out. (Note: I personally believe that a considerable source of profit comes from @ GSR_io's market making losses.) ———————————————————————— In the past cryptocurrency market, retail investors generally believed that listing on major exchanges had a wealth effect, so they did not worry about whether there were enough buying orders after the project was listed. Nowadays, most retail investors no longer chase high prices when the project first goes online, resulting in a significant decrease in buying expectations after the project is launched. The hard cost of launching the project on the exchange is extremely high. The comprehensive cost of B may be $3 million (different for each deal), while the comprehensive cost of B's second tier may be $1.5 million (different for each deal) And there are additional implicit costs when the project goes online on the exchange: 1. The proportion of airdrops of platform coins is quite large, and most of the airdrops into the hands of stakers will be converted into selling orders. This part of the money is something that market makers/project parties have to eat hard. The cost of marketing for KOL community promotion is also real, ranging from tens of thousands of units to one million units And before the financing strategy round, these projects could hardly come up with so much money, and the strategy round has become a core issue here. You need to take millions of dollars as a cost to go to the exchange, and you need other institutions to inject capital into you. In traditional markets, this is similar to crossing a bridge, with the difference being that the institutions in the strategic round do not charge interest, but rather a share of the token profits after going online. Obviously, the potential benefits of going live on the platform are considerable. So it will force the project team to directly increase the market value after going online, and FDV may even be more than 5 times higher than the strategic round valuation. However, the fundamentals of the project (on chain data, actual user social media data marketing) lack motivation to continue promoting after the launch of Binance. I won't go into detail here either. Most of the data collected when blockchain projects are launched is the result of false prosperity and the manipulation of studios. This will also directly lead to significant downside risks for all retail investors who invest several times higher than their valuations. ———————————————————————— The original intention of constraining the project party's deposit/listing fee is certainly good. We can filter out project parties with strong market competitiveness but poor resource capabilities. The bad result is that when the market is not good, the project party can only drive up the currency price/market value, overdraw the project growth and create a foam to earn the cost when listing the currency. As @ Max_Sunxxx said, strategic round financing is a debt for the project party. The result of the false boom and foam is that the participating institutions made huge profits in the foam, and the retail investors of value investment continued to backtrack. In such an environment of the altcoin market, we cannot expect any reason for traditional funds to enter and buy altcoins. In my opinion, it is also the biggest problem in this web3 industry.