Picture this: a token you believed in drops twenty percent overnight. The team seems blindsided, exchanges start freezing wallets, and suddenly everyone is screaming “scam.” You’ve seen it a dozen times this cycle alone. But what if I told you the real villain isn’t some rogue founder or a whale with a grudge—it’s the very firms hired to keep the market healthy?
I’ve watched too many solid projects get quietly gutted by the people who were supposed to protect them. And the worst part? It’s not even illegal. It’s just business—ugly, lopsided, opaque business.
The Hidden Engine That Can Break Any Token
Market makers aren’t the bad guys by default. Someone has to tighten spreads and keep the order book from looking like a ghost town. Without them, most new tokens would trade like penny stocks on life support. The problem isn’t that market makers exist—it’s the way almost every deal is structured today.
How the “Loan + Call Option” Game Actually Works
Let me break it down like I would over coffee with a founder friend who just got burned.
The project hands over millions of native tokens to the market maker. In exchange, the market maker promises to provide liquidity—buying when there’s pressure, selling when someone wants in, basically acting like a shock absorber for price.
Sounds fair, right? Here’s the catch: the market maker also gets call options on those borrowed tokens, often at strike prices five or ten times higher than the listing price, with vesting cliffs that conveniently line up with peak hype moments.
Translation: if the token moons, the market maker can buy cheap tokens they never actually paid for. If the token craters—which, let’s be honest, most do—they just hand the borrowed tokens back and walk away laughing, usually after hedging or outright shorting the project into oblivion.
“Heads I win big, tails you lose everything.” That’s the real deal in plain English.
Why Founders Keep Signing These Deals Anyway
Most early-stage teams are broke by the time they finish audits, legal wrappers, and exchange listing fees. Paying a market maker in stablecoins—the clean, founder-friendly way—can easily run seven figures upfront. Almost nobody has that lying around.
So they take the only path offered: borrow against future tokens. It feels like free money at the time. Six months later it feels like signing your own death warrant.
- Treasury empty after compliance costs
- No reputable market maker accepts pure stablecoin retainers anymore
- Investors screaming for liquidity on day one
- Competitors launching with tight spreads and deep books
Pick your poison, because those are the options on the table in 2025.
The Hedging Death Spiral Nobody Sees Coming
Here’s where it gets vicious. Once the market maker owns those mispriced call options, their incentives flip overnight.
They’re no longer rewarded for a healthy, stable chart. They’re rewarded for volatility they can exploit. A quick 5x pump followed by a controlled bleed lets them exercise options at the top and short the way down. Clean, risk-adjusted profit.
And because they control the book, they can manufacture that exact pattern whenever vesting unlocks hit. I’ve seen tokens trade in perfect stair-step patterns—up during lock-up periods, brutal dumps the moment new tokens hit the market maker’s wallet. It’s not a coincidence.
Retail shows up for the pump, gets absolutely rekt on the way down, and the project gets labeled a rug before the product even ships mainnet.
The Information Gap Is Criminal
Think about who’s sitting across the table. On one side: derivatives traders who’ve structured hundreds of these deals. On the other: founders who spent the last two years building smart contracts and maybe raised a small seed round from friends.
One side knows exactly how these options price under different volatility regimes. The other side thinks “vesting schedule” is just another word for “tokens unlock slowly.”
It’s like playing poker against someone who can see your cards and also deals the deck.
What a Fair Market-Making World Could Look Like
We’re not doomed to live like this forever. There are better models—we just need the guts to demand them.
- Standardized disclosure templates—strike prices, Greeks, hedging policy, everything public on day one
- Open-source benchmarking tools so founders can simulate worst-case scenarios before signing
- Stablecoin-first retainers funded by community pools or launchpads that actually care about alignment
- DAO-managed liquidity desks where governance decides hedging rules instead of a single offshore entity
- Reputation scoring for market makers based on historical token performance post-engagement
None of these ideas are rocket science. They just threaten the current profit model, which is why you’ll never see the big players volunteer them.
The Retainer Model That Almost Nobody Can Afford (Yet)
There is one clean alternative that already exists: pay the market maker in stablecoins and give them tokens only for trading inventory. No options, no upside skew, no incentive to short your own project.
Guess how many teams can afford the $5-15M upfront? Exactly. The handful that raised $100M+ from tier-one VCs. Everyone else is stuck choosing between death by slow bleed or death by sudden dump.
Until launchpads, accelerators, or community treasuries step up to front those stablecoin costs, nothing changes.
Real-World Damage Beyond the Charts
It’s not just money. When a token gets wrecked by its own market maker, the fallout is brutal:
- Team morale collapses—founders question whether shipping was even worth it
- Developer retention tanks—why build if the token is dead?
- Exchange relationships sour—delistings follow “controversy”
- Future fundraising becomes impossible—investors remember the chart
I’ve watched founding teams dissolve partnerships, abandon roadmaps, and in some cases leave crypto entirely because the economic reality became unbearable. That’s the hidden cost nobody talks about.
How Founders Can Protect Themselves Today
Until the ecosystem grows a spine, here’s what actually works right now:
- Never sign anything without running the option pricing through an independent quant shop—even if it costs $25k, it’s the cheapest insurance you’ll ever buy
- Push vesting cliffs as far out as humanly possible—18-24 months minimum
- Demand no-hedge or limited-hedge clauses (yes, some firms will agree if you have leverage)
- Build organic liquidity early through community staking or single-sided pools—every basis point you control yourself is one less you owe the shark
- Talk to projects that worked with the same firm six months ago—references beat NDAs every time
It’s not perfect, but it beats waking up to a 40% red candle and a Telegram full of knife emojis.
The Bigger Picture We Keep Ignoring
Crypto loves to scream about decentralization, but the most important part of any token—the price formation process—is about as centralized as it gets. A handful of firms decide which projects live or die, and they’re compensated with structures that reward destruction over creation.
That’s not a market. That’s a casino where the house also loads the dice and owns the security cameras.
We’re building the future of money on foundations this shaky, then act shocked when everything collapses the moment macro turns or sentiment shifts. Maybe it’s time we fixed the plumbing before we keep adding floors to the building.
Because right now, some of the most innovative teams in the world aren’t failing because their tech is bad. They’re failing because they trusted the wrong middlemen with the keys to their treasury.
And until we shine a light on these deals—every strike price, every vesting cliff, every hedging clause—that won’t change.
The tech is ready. The vision is there. We just need liquidity layers that don’t eat the projects they’re supposed to feed.
Anything less, and we’re not building a new financial system. We’re just recreating the old one with worse user interfaces and extra steps.
