Market Makers: How Whales Control the Cryptocurrency Market from the Shadows

Most traders think that the market is a fair game. In reality, big players have an informational advantage that changes all the rules.

Who do we call market makers?

Market makers (MM) are not just intermediaries who buy and sell. They are professional trading firms that actively manipulate prices through algorithmic trading. Unlike regular liquidity providers (LP), who passively hold assets in pools and earn fees, MM constantly plays on spreads and price movements.

Difference in simplicity:

• LP: tightened it and forgot (passively in pools)
• MM: active trading, order placement, playing on the spread

Why are specialized contracts (NDA) a red flag?

Exchange market makers almost always sign confidentiality agreements. This means they have access to:

• Internal information about trading volumes
• Data on large orders from other traders
• Information about preparing listings for new tokens
• Priority trading conditions (reduced fees)

No exchange will share such information with ordinary users. This creates an asymmetry of knowledge that market makers use for profit.

5 manipulation techniques you should know

1. Spoofing — advantageous orders placed without the intention of execution The MM places a large buy order, creating an illusion of demand. As soon as the price goes up, the order is canceled, and the MM sells at a higher price.

2. Pump and Dump — coordinated price manipulation The MM group synchronously buys the asset, attracting retail traders. At the peak, they sell off, leaving others with losses.

3. Footprints Hunting — targeted liquidation MM tracks stop-loss levels and pushes the price through them, collecting liquidity from dispersed traders. Then the exchange reverses.

4. Wash Trading — fictitious transactions MM simultaneously buys and sells, creating an illusion of activity. This attracts other traders to the market before real movements.

5. Spread Manipulation — playing with profitability Narrowing the spread when they want to raise the price → more buyers. Widening the spread when they want to lower it → difficulty in buying = panic.

Who is behind the scenes?

These are specialized trading firms with millions in capital:

• Jump Trading — one of the largest high-frequency firms
• Citadel Securities — controls a significant portion of the volumes
• Jane Street — algorithmic traders in all markets
• Alameda Research — was the king of crypto until the FTX collapse

Exchanges fund them to have constant liquidity.

Why do exchanges need them?

1. Liquidity — without MM the spreads would be huge.
2. Price Stability — on the new pairs, MM artificially maintains the price within normal fluctuations.
3. Chaos Control — a paradox: MM simultaneously manipulate and protect the market.

How it works when listing a new token

1. The exchange is preparing a list of the new token
2. Contracts a market maker to support liquidity
3. The MM receives tokens at a fixed price in advance
4. At the opening: MM places large buy/sell orders, creating a narrow spread.
5. MM extracts commissions + profit on spread

Bottom line

Market makers are the whales that operate the market from the shadows. They have:

• Direct access to exchange information
• Capital for significant orders
• Algorithms for liquidity mining
• Legal non-disclosure agreements

Informed traders understand: if you are competing against MM on the same exchange, you are already playing with inexhaustible information. This is not a fair game — it's just a neater version of medieval price manipulation.