Token Crashes Expose Dark Side of Crypto Market Making Deals

  • Sudden collapses of Movement Labs’ MOVE token and Mantra’s OM token caused major disruption in crypto market-making activities.
  • Price drops exposed secret agreements, unclear token unlocks, and covert dealings among insiders.
  • Market-making firms now push for stricter transparency and protective deal structures.
  • Secondary over-the-counter (OTC) token trading is distorting supply and affecting price discovery.
  • Industry experts say trust has declined, with more scrutiny on project transparency and token supply data.

Two major cryptocurrency tokens, Movement Labs’ MOVE and Mantra’s OM, experienced sudden and significant price crashes in April 2024, leading to major disruptions among crypto market makers. These crashes quickly revealed hidden parties, questionable token unlock schedules, and side agreements that affected how tokens were distributed and traded.

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The collapse of OM led to a drop of more than 90% within hours despite no obvious reason for the decline. An investigation revealed that some Movement Labs executives coordinated with their market maker to sell $38 million worth of MOVE tokens on the open market.

Market-making firms, such as Metalpha, are now implementing new procedures. In an interview with CoinDesk, Metalpha said, “Our approach now includes more extensive preliminary discussions and educational sessions with project teams to ensure they thoroughly understand market-making mechanics.” The company added, “Deal structures have evolved to emphasize long-term strategic alignment over short-term performance, incorporating safeguards against unethical behavior such as excessive token dumping and artificial trading volume.”

Industry participants report that deal terms face tighter scrutiny, and some liquidity providers are unwilling to work with projects lacking transparency. Metalpha’s Max Sun commented, “The era of presumptive trust has concluded,” noting that reputations are no longer enough to guarantee good behavior after high-profile abuses.

Much of the issue comes from secondary OTC markets where locked tokens are traded privately between funds, syndicates, and early backers before public vesting dates. This activity makes it difficult for traders and market makers to understand the true supply and available float for a given token. Min Jung of Presto Research said, “The entire supply and vesting schedule has become distorted because of these off-market deals, and for liquid funds, the real challenge is figuring out when supply is actually unlocking.”

The fallout from MOVE and OM has led to widespread calls for more transparency in token listings, unlock schedules, and private market agreements. As the industry adjusts, market participants remain focused on preventing hidden agreements and unpredictable token releases from undermining confidence and price stability.

For more details, see: Movement Labs Secretly Promised Advisers Millions in Tokens, Leaked Documents Show.

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