The Dark Art of Active Market Making: How Crypto's Most Toxic Deals Really Work

The cryptocurrency industry has long struggled with transparency in market making, but a recent episode of Lightspeed has pulled back the curtain on one of the sector's most troubling practices. Matthieu Jobbé-Duval, a veteran with over a decade of experience in traditional finance market making at major banks, joined the podcast to expose the mechanics behind some of crypto's most spectacular token collapses. His revelations paint a picture of an industry where the line between legitimate liquidity provision and outright market manipulation has become dangerously blurred.

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The conversation centered on a critical question that has puzzled many retail investors: why do some tokens maintain relatively stable, continuous price action while others experience catastrophic 90%+ crashes seemingly overnight? The answer, according to Jobbé-Duval, lies not in normal market dynamics but in a practice euphemistically known as "active market making" – a term he argues obscures what is fundamentally a manipulative structure designed to artificially inflate token prices before an inevitable collapse.

This distinction between legitimate market making and its "active" variant represents perhaps the most important lesson for anyone participating in cryptocurrency markets. While traditional market making serves the essential function of providing liquidity and facilitating price discovery, active market making operates on entirely different principles – ones that prioritize short-term price appreciation over sustainable market health. Understanding this difference is crucial for investors, project founders, and regulators alike.

The Anatomy of a Token Collapse

The podcast began with host Jack presenting three particularly striking examples of token price action that defied normal market behavior. The first was Polyhedra (ZKJ), whose chart showed a pattern of moving along at a stable market cap before spiking approximately 4x overnight, only to crash back down with equal speed. This whipsaw action is not characteristic of organic market forces responding to news or fundamentals – it suggests something far more deliberate at play.

The second example was Mantra, which achieved even more notoriety by reaching top-20 status among all cryptocurrency tokens by market capitalization before losing approximately 99% of its value in a stunning collapse. For a token to achieve such prominence and then implode so completely represents one of the most dramatic failures in recent crypto history. The speed and magnitude of the decline raised immediate questions about what market structures could possibly allow such a catastrophic outcome.

The third case study was Solayer, a token from the Solana ecosystem that demonstrated a different but equally concerning pattern. This token showed relentless upward momentum for weeks and even months, creating an appearance of unstoppable organic growth, before experiencing a sudden and severe overnight crash. The extended buildup followed by rapid collapse is particularly insidious because it gives investors more time to develop conviction in what appears to be genuine market strength.

What makes these examples so compelling is their shared characteristic: none of them appeared to be triggered by traditional negative catalysts. There were no major hacks, no founders being arrested, no catastrophic corporate news events. In a functioning market, a 90% overnight decline in the absence of material news would be virtually impossible. The fact that it happens repeatedly in cryptocurrency suggests structural issues with how tokens are brought to market and maintained.

Understanding Traditional Market Making

Before diving into the mechanics of active market making, it's essential to understand what legitimate market making looks like. Traditional market makers serve a vital function in financial markets: they provide liquidity by continuously posting both buy and sell orders, effectively creating a two-sided market that allows other participants to trade efficiently. This service reduces bid-ask spreads and enables smoother price discovery.

In traditional finance, market makers at major banks operate under strict regulatory oversight. Their primary obligation is to maintain orderly markets, not to push prices in any particular direction. They profit from the spread between their bid and ask prices, taking on inventory risk as they absorb buying and selling pressure from other market participants. This is a fundamentally different business model from what active market makers propose.

The standard deal structure for legitimate crypto market makers typically involves a combination of retainer fees and options. The market maker receives a fixed payment for their services and may also receive options on the project's tokens as additional compensation. While this structure creates some conflicts of interest – the market maker benefits if token prices rise – it does not inherently lead to the kind of manipulative behavior that causes 99% crashes.

When market making is done properly, token prices behave in a manner consistent with normal market dynamics. Prices rise and fall in response to genuine supply and demand, news events, and broader market conditions. The price action is continuous rather than punctuated by sudden massive moves. Importantly, a properly functioning market should never experience overnight collapses of the magnitude seen in the examples discussed.

The Birth of "Active Market Making"

The term "active market making" appears to have been coined by DWF Labs approximately one to two years ago, according to Jobbé-Duval. As a veteran of traditional finance market making, he was immediately struck by the novelty of the term. In his decade of experience at major banks around the world, he had never encountered this concept – because it doesn't exist in regulated markets where such practices would be clearly illegal.

When DWF initially described their active market making approach publicly, the description was striking in its candor. According to Jobbé-Duval's recollection, it was presented as helping clients push their token prices in directions that were favorable to them. This framing immediately raised red flags for anyone familiar with traditional securities regulation, where market manipulation is a serious criminal offense.

The marketing appeal of active market making to crypto project founders is understandable, if troubling. Many founders view their token price as a problem to be solved, similar to a technical bug in their protocol. When an active market maker approaches them promising to "help" their token price reach desired levels, it can seem like a solution to a frustrating challenge. The fundamental problem is that treating price as an engineering problem completely ignores the purpose of markets in the first place.

The entire point of having a token trade publicly is to allow the market to determine its value through the aggregation of countless individual buy and sell decisions. When a market maker promises to override this price discovery process and deliver predetermined outcomes, they are not providing a service – they are proposing to subvert the core function of the market itself. This distinction is often lost on founders who lack deep experience in financial markets.

The Mechanics of Price Manipulation

The actual mechanics of how active market making schemes work are relatively straightforward once understood. The fundamental principle is simple: to make a price go up, you need to buy. And the fewer sellers present in the market, the easier it is to push the price higher with any given amount of buying pressure. This creates the basic recipe for artificial price inflation.

The first step in this scheme is to ensure a very low circulating supply of tokens. This is easier in crypto than it might seem because major data aggregators like CoinGecko and CoinMarketCap receive their circulating supply figures directly from the projects themselves. There is essentially zero due diligence or verification of these numbers. A project can report whatever circulating supply they choose, regardless of the actual tokens available in the market.

The true circulating supply – meaning tokens that are actually available for trading – needs to be small for the manipulation to work efficiently. With fewer tokens available to be sold, each dollar of buying pressure has an outsized impact on price. This creates the conditions for dramatic upward moves on relatively modest capital expenditure.

The critical challenge then becomes sourcing the capital needed to execute the buying campaign. This is not about traditional fundraising from venture capitalists or public markets. The active market makers need cash for the foundation or project treasury specifically to execute their buying strategy. Without significant capital, the manipulation cannot be sustained.

The Locked Token Financing Mechanism

The ingenious – and ultimately destructive – innovation of active market making is how it solves the capital problem. The scheme relies on selling locked tokens at steep discounts in exchange for immediate cash. These are tokens that buyers cannot receive or sell for three, six, or nine months into the future, but the project receives the cash payment immediately upon signing the deal.

This creates a powerful near-term advantage: the project suddenly has significant capital to deploy in the market, while the tokens sold won't create selling pressure for many months. In theory, this provides a runway to build genuine value and community support. In practice, it creates a ticking time bomb that eventually detonates with catastrophic consequences.

The buyers of these locked tokens – typically liquid hedge funds, sometimes affiliated with venture capital firms – demand substantial discounts to compensate for the risk and illiquidity they're taking on. Six to nine months ago, these discounts were typically in the 20-30% range. As the risks of these structures have become more apparent following several spectacular failures, discounts have expanded dramatically to 70% or even 80%.

To understand the mathematical implications, consider a token sold locked for delivery in six months. If the discount is 80%, the project only receives 20 cents in cash for every dollar of future token delivery. This means that to raise one dollar today, the project must commit to delivering five dollars worth of tokens in the future. The leverage inherent in this structure is extreme and creates an almost impossible burden for the project to overcome.

The "Escape Velocity" Fantasy

Active market makers pitch this structure to founders using compelling analogies. The concept of "escape velocity" is particularly powerful: just like a rocket needs to reach a certain speed to break free of Earth's gravity, the argument goes, a token just needs enough momentum to reach a self-sustaining level of organic demand. Once you reach that point, the future token deliveries won't matter because genuine supporters will absorb the selling pressure.

This narrative has intuitive appeal. If you can create enough buzz, enough apparent success, enough video content about your rising token price, you can "fake it till you make it." The rising price becomes its own validation, attracting more buyers who see a success story and want to participate. The founders can point to their chart and claim legitimacy, even if the underlying price action is entirely manufactured.

The problem with this analogy is that rockets either reach escape velocity or they explode. There is no middle ground. And in the case of active market making, the mathematical odds are stacked heavily against success. Remember that for every dollar of buying pressure deployed today, the project has committed to delivering multiple dollars of future selling pressure. The runway must eventually end.

When the cash runs out before the project achieves genuine organic demand – which is almost always the case – the manipulation engine sputters and dies. At that point, the artificial support disappears and the true price discovery process begins. This is invariably ugly, as the market reprices the token to reflect actual demand rather than manufactured buying pressure.

Why Collapses Happen Before Unlocks

One of the most counterintuitive aspects of these schemes is that the catastrophic price collapses often occur well before the locked tokens actually unlock. Looking at the charts discussed in the podcast, some of the crashes happened just weeks after the manipulation period, not months later when the locks expired. This timing puzzle has a clear explanation rooted in the incentives of the locked token buyers.

The hedge funds that purchased locked tokens at steep discounts are sophisticated market participants who watch screens constantly. As the manipulation campaign proceeds and prices rise, they're making paper profits on their positions. They can't realize those gains yet because their tokens are locked, but they're pleased with the trajectory. The position looks profitable and they're content to wait.

However, these funds are also experienced enough to recognize when the manipulation is losing steam. When the buying pressure starts to wane – perhaps because the cash is running out, or because there are no more locked token buyers to tap – the rate of price appreciation slows. What was rising 10% per week might plateau or even begin declining slightly.

This is the critical moment when the collapse begins. The locked token holders know they're sitting on positions that will become worthless if the manipulation fails. They cannot sell their tokens, but they can hedge their exposure using perpetual futures contracts. And that's exactly what they do.

The Perpetual Futures Death Spiral

When the first sophisticated locked token holder decides to hedge by shorting perpetual futures, they trigger a cascade that can destroy the token's price within hours. The short perpetual position locks in their profit regardless of what happens to the spot price – if the token crashes, their short profits offset their locked token losses. This is rational individual behavior that produces catastrophic collective outcomes.

The telltale sign of this dynamic is the perpetual funding rate. In normal markets, funding rates oscillate around zero, with longs paying shorts when prices rise and shorts paying longs when prices fall. But when locked token holders pile into short perpetual positions, the funding rate collapses dramatically. Jobbé-Duval mentioned funding rates dropping 20-30% per day during these events, which is extraordinarily extreme.

The first fund to hedge captures the best prices on their short. But their selling creates the signal for every other locked token holder to do the same thing. The second fund sells into lower prices. The third sells lower still. This creates a rapid cascade of selling pressure as every participant races to hedge before prices fall further.

As the perpetual futures price collapses due to this short selling pressure, the dislocation between perpetual and spot prices creates opportunities for arbitrageurs. These traders buy the cheap perpetuals and sell spot, or sell spot and wait for convergence. Either way, the weakness in perpetuals quickly transmits to the spot market. The active market maker themselves, sitting on long spot positions, may capitulate and sell as well.

The Aftermath: Permanent Damage

By the time the selling cascade exhausts itself, the token's price is typically decimated. The 90%+ drawdowns seen in the examples are not aberrations – they're the natural endpoint of these structures. The locked tokens haven't even unlocked yet, but the damage is already done. When the locks do expire, nothing dramatic happens because all holders have already hedged their exposure.

The project is left with a devastated chart that becomes a permanent liability. Every future conversation with potential investors, partners, community members, or builders is overshadowed by the obvious question: what happened to your price? The chart becomes famous for all the wrong reasons, a cautionary tale rather than a success story.

The reputational damage extends beyond individual projects to the broader cryptocurrency ecosystem. When retail investors see tokens lose 99% of their value overnight without any obvious cause, it reinforces the perception that crypto markets are rigged against ordinary participants. This perception, unfortunately grounded in reality in these cases, slows mainstream adoption and undermines legitimate projects.

For the Solana ecosystem specifically, incidents like Solayer's price collapse create headwinds for other projects building on the network. Potential investors become more skeptical, community members become more cynical, and the innovative technology that Solana offers is obscured by concerns about market integrity. This is a tragedy because Solana's technical capabilities have nothing to do with the market making practices of individual token projects.

The Terminology Problem

Jobbé-Duval was particularly critical of the terminology used to describe these practices. The term "active market making" sounds positive – after all, who wants a passive market maker? The framing suggests diligence, engagement, and superior service. In reality, it describes a fundamentally manipulative structure that destroys value for everyone except the manipulators.

This linguistic sleight of hand is common in crypto. Complex financial engineering is dressed up in approachable language that obscures its true nature. Founders who lack traditional finance experience hear "active market making" and think they're getting premium service. They don't realize they're being pitched a scheme that has a high probability of destroying their project.

The industry would benefit from more honest terminology. What active market makers are offering is really price manipulation financed by toxic locked token deals. If it were described accurately, far fewer founders would agree to participate. But the euphemistic framing allows these practices to continue spreading, claiming new victims with each cycle.

Warning Signs for Investors

For investors trying to navigate these treacherous waters, there are several warning signs to watch for. Sudden, sustained upward price movement without corresponding positive news or developments is always suspicious. Legitimate price appreciation is typically tied to observable improvements in metrics, partnerships, or market conditions. Price appreciation that appears divorced from fundamentals warrants skepticism.

Extremely negative perpetual funding rates are particularly diagnostic. When funding rates collapse dramatically, it often signals that sophisticated players are rushing to hedge locked positions. This is visible on most major exchanges and data providers. While not every funding rate collapse indicates manipulation, extremely negative rates during otherwise calm market conditions should trigger caution.

The quality and transparency of a project's circulating supply reporting is another indicator. Projects that are vague about their token distribution, that report suspiciously round numbers, or that seem to have very thin trading relative to their reported circulating supply may be candidates for manipulation. Legitimate projects generally provide detailed token distribution schedules and unlock calendars.

Finally, investors should be wary of tokens that seem to be everywhere in terms of marketing and promotion but lack corresponding fundamental adoption metrics. Active market making schemes often invest heavily in visibility to attract retail buyers who can be sold into as the manipulation unwinds. Buzz without substance is a warning sign.

The Role of Exchanges

Cryptocurrency exchanges play a complicated role in this ecosystem. On one hand, they provide the infrastructure on which these manipulations occur. On the other hand, they face limited regulatory requirements to prevent manipulation, and the competitive dynamics of the industry make it difficult to refuse listings even for suspicious tokens.

Some exchanges have implemented more rigorous listing standards and market surveillance programs. These efforts are commendable and should be encouraged. However, the decentralized nature of cryptocurrency means that manipulation occurring on one exchange quickly affects prices everywhere through arbitrage. Effective solutions require coordination across the entire ecosystem.

The proliferation of perpetual futures contracts has particularly complicated the landscape. While perps provide valuable hedging and speculation tools for legitimate market participants, they also enable the hedging strategies that cause manipulation to unwind so violently. The leverage available on many perp platforms amplifies both the manipulation and its collapse.

Regulatory Considerations

Traditional financial markets have developed extensive regulations specifically to prevent the kinds of manipulation that are commonplace in crypto. Market manipulation, wash trading, and front-running are all illegal in securities markets. The penalties are severe and enforcement is active. These regulations exist because regulators learned through experience that unmanipulated markets serve society better than manipulated ones.

The cryptocurrency industry's complicated regulatory status has created a gray zone where practices that would be clearly illegal for stocks or bonds may face limited consequences for tokens. This ambiguity attracts bad actors who exploit the regulatory gaps while legitimate participants suffer from the resulting reputational harm.

As regulatory clarity increases – whether through new legislation, SEC enforcement actions, or international coordination – many active market making structures will likely become clearly prohibited. Projects engaging in these practices today may face retroactive liability. Founders should consider this legal risk carefully before entering into these arrangements.

Lessons for Token Issuers

For founders contemplating market making arrangements, the lessons from these disasters should be clear. The fundamental principle to internalize is that market prices should be determined by markets. Any arrangement that promises to deliver predetermined price outcomes is by definition promising to manipulate the market. This is both ethically problematic and practically dangerous.

Legitimate market making provides valuable services: tighter spreads, deeper liquidity, and more efficient price discovery. These benefits are worth paying for through retainer fees and reasonable option grants. But the service being purchased is liquidity provision, not price manipulation. Any prospective market maker that emphasizes their ability to "help" your price should be viewed with extreme skepticism.

The locked token financing arrangements that fuel active market making should be avoided entirely. The mathematics are simply too unfavorable. When you commit to delivering five dollars of future tokens to raise one dollar today, you have created a situation where success requires a 5x gain just to break even. The odds of achieving escape velocity are minimal, and the downside when you fail is catastrophic.

Building genuine value and community is harder and slower than manufacturing fake price appreciation, but it's the only sustainable path. Tokens that trade at fair values set by genuine supply and demand may not generate exciting charts in the short term, but they also won't generate the devastating collapses that destroy projects and harm investors.

The Broader Impact on Crypto Adoption

These market manipulation practices have consequences far beyond the individual tokens affected. Every spectacular collapse erodes trust in cryptocurrency as an asset class. Retail investors who buy tokens based on impressive-looking price charts, only to see 90%+ of their investment evaporate overnight, become permanent crypto skeptics. They tell their friends, family, and social networks about their experience.

This matters for the legitimate innovation happening in the cryptocurrency space. Solana, for example, offers genuinely revolutionary technology that enables applications impossible on traditional infrastructure. The network's speed, low costs, and growing ecosystem represent real value creation. But when tokens in the Solana ecosystem become associated with manipulation and price crashes, the network's technological achievements are overshadowed.

The industry's path to mainstream adoption requires building trust with ordinary people. That trust is built through consistent, fair treatment – not through cycles of artificial pump and devastating dump. Every active market making scandal makes the adoption journey longer and harder for everyone else in the space.

Progress and Hope

Despite the prevalence of these practices, there are reasons for optimism. The increasing awareness of active market making structures and their risks is leading to fewer projects falling victim. The spectacular failures discussed in the podcast serve as cautionary tales that educate the market. Founders are becoming more sophisticated about evaluating market maker proposals.

The Solana ecosystem in particular has been developing stronger community standards around token launches and market making. Legitimate projects increasingly emphasize transparency, fair distribution, and honest price discovery. These practices may not generate the most exciting short-term charts, but they build sustainable value that benefits all ecosystem participants.

Market surveillance tools are also improving. Data providers and analysts are getting better at detecting manipulation in real-time. When suspicious patterns emerge, they're flagged more quickly and investigated more thoroughly. This transparency creates reputational costs for manipulators that may not have existed previously.

Conclusion: The Path Forward

The exposure of active market making practices represents an important moment for cryptocurrency markets. Sunlight is the best disinfectant, and conversations like the one on Lightspeed help educate market participants about the risks they face. Armed with this knowledge, investors can make better decisions and founders can avoid toxic arrangements.

The fundamental challenge is aligning incentives across the ecosystem. Founders need to understand that manipulated price appreciation is worse than no price appreciation – it's borrowed success that must eventually be repaid with interest. Market makers need to be held accountable for the outcomes of their strategies, not just their promised services. Investors need to demand transparency about market making arrangements as a condition of their participation.

For Solana specifically, the path forward involves doubling down on the ecosystem's core strengths: superior technology, vibrant developer community, and innovative applications. Tokens that launch on Solana should be held to high standards of market integrity that match the technical excellence of the underlying platform. This is how Solana can differentiate itself as the blockchain for legitimate, sustainable projects.

The cryptocurrency industry is still young and still developing the institutions and practices that will define its mature form. The exposure of toxic structures like active market making is part of this maturation process. By learning from these failures and demanding better, the community can build markets that are worthy of the revolutionary technology they support.

Facts + Figures

• Active market making is a term reportedly coined by DWF Labs approximately one to two years ago, describing practices fundamentally different from traditional market making

• Locked token discounts have expanded dramatically from 20-30% six to nine months ago to 70-80% currently as risks have become more apparent

• At an 80% discount, projects must commit to delivering $5 of future tokens to raise $1 today, creating extreme mathematical leverage against success

• CoinGecko and CoinMarketCap receive circulating supply figures directly from projects with zero due diligence or verification

• Perpetual funding rates during manipulation collapses can reach 20-30% per day in extreme negative territory

• Tokens have experienced 99%+ value destruction overnight without any corresponding negative news events

• Polyhedra (ZKJ) exhibited a pattern of 4x overnight spike followed by immediate crash back to baseline

• Mantra reached top-20 cryptocurrency status before losing approximately 99% of its value in a collapse

• Solayer showed weeks to months of steady upward momentum before experiencing overnight catastrophic losses

• Traditional finance market makers operate under strict regulatory oversight that prevents the manipulation common in crypto

• Active market makers pitch their services as helping clients "put the token price wherever you want it to go"

• Price collapses typically occur weeks after manipulation ends, not months later when locked tokens actually unlock

• The collapse mechanism begins when sophisticated locked token holders short perpetual futures to hedge exposure

• Arbitrage between perpetual and spot markets transmits weakness from perps to spot, completing the collapse

• The standard legitimate market maker deal structure involves retainer fees plus options, not price manipulation commitments

Questions Answered

Why do some crypto tokens lose 90% of their value overnight without any negative news?

These catastrophic collapses are typically the result of "active market making" schemes unwinding rather than organic market forces. The manipulation involves artificially pumping prices using cash raised from selling locked tokens at steep discounts. When the cash runs out or sophisticated investors detect the manipulation failing, they rush to hedge by shorting perpetual futures. This creates a cascade of selling that transmits from perps to spot, devastating prices within hours. The absence of negative news is itself a tell – legitimate 90% drawdowns require catastrophic events to trigger.

What is the difference between regular market making and "active market making"?

Traditional market making involves providing liquidity by posting continuous buy and sell orders, earning profits from bid-ask spreads while facilitating efficient price discovery. Active market making, by contrast, involves deliberately pushing prices in predetermined directions using capital raised through locked token sales. While regular market makers serve the market's price discovery function, active market makers subvert it by manufacturing artificial demand. The terminology "active" is euphemistic marketing designed to make manipulation sound like premium service.

How do active market making deals actually work?

The scheme begins with ensuring a low circulating supply of tokens to make price manipulation easier. Capital is raised by selling locked tokens (deliverable in 3-9 months) at steep discounts – often 70-80% below current prices. This cash is then used to buy tokens in the market, artificially inflating prices. The pitch to founders frames this as achieving "escape velocity" before locked tokens unlock, but mathematically the structure requires extreme price appreciation just to break even. When cash runs out, the manipulation fails and prices collapse.

Why do price collapses happen before locked tokens actually unlock?

Locked token buyers are typically sophisticated hedge funds watching screens constantly. When they detect the manipulation losing momentum, they don't wait for their tokens to unlock – they hedge immediately by shorting perpetual futures. This locks in their paper profits regardless of what happens to spot. When multiple funds race to hedge simultaneously, they drive perp prices lower, which transmits to spot through arbitrage. The resulting cascade devastates prices weeks or months before any actual unlocks occur.

How can investors identify tokens potentially involved in manipulation schemes?

Warning signs include: sustained price appreciation without corresponding fundamental news or development; extremely negative perpetual funding rates suggesting mass hedging activity; vague or suspicious circulating supply figures; thin trading volume relative to reported market cap; and heavy marketing presence without corresponding adoption metrics. The combination of impressive charts with limited transparency about market making arrangements should trigger particular skepticism.

What is the mathematical problem with locked token financing?

When projects sell locked tokens at steep discounts to raise cash for manipulation, they create unsustainable leverage. At current discount rates of 70-80%, raising $1 today requires committing to deliver $4-5 of tokens in the future. This means the token price must appreciate 4-5x just to break even on the deal. If the manipulation fails to achieve this "escape velocity," the project faces devastating dilution when locks expire – assuming the collapse hasn't already occurred through the perp hedging cascade.

Why don't exchanges prevent this kind of manipulation?

Exchanges face limited regulatory requirements compared to traditional securities venues, and competitive pressure makes it difficult to refuse listings. The decentralized nature of crypto means manipulation on one venue affects prices everywhere through arbitrage. While some exchanges have improved surveillance and listing standards, effective prevention requires ecosystem-wide coordination. The availability of high-leverage perpetual futures particularly complicates matters by enabling the hedging strategies that cause violent collapses.

What should token founders look for in legitimate market making arrangements?

Legitimate market making involves services like providing liquidity, tighter spreads, and efficient price discovery – not promises about price direction. Standard deal structures include retainer fees for services plus options as additional compensation. Founders should be deeply skeptical of any market maker emphasizing ability to "help" prices reach desired levels, and should avoid locked token financing arrangements entirely. The goal should be genuine price discovery, not manufactured appreciation that inevitably reverses.

How does this affect the broader Solana ecosystem?

When tokens associated with the Solana ecosystem experience manipulation-driven collapses, it creates reputational headwinds for the entire network. Potential investors become more skeptical, and Solana's genuine technological innovations get obscured by market integrity concerns. However, the ecosystem is developing stronger community standards around transparent launches and fair market making. Projects launching on Solana increasingly emphasize practices that match the network's technical excellence.

Is active market making illegal?

In traditional securities markets, the practices described would clearly constitute illegal market manipulation. Cryptocurrency's complicated regulatory status creates gray zones where enforcement is less certain. However, as regulatory clarity increases through new legislation and enforcement actions, many active market making structures will likely become clearly prohibited. Projects and market makers engaging in these practices today may face retroactive legal liability, representing significant risk beyond the market damage already described.