A listings adviser who spoke to Cointelegraph on the condition of anonymity echoed the point, emphasizing that outcomes depend on how well a project manages its liquidity relationships.“I’ve seen a project with up to 11 market makers — about half using the loan model and the rest smaller firms,” they said.“The token didn’t dump because the team knew how to manage price and balance the risk across multiple partners.”The adviser compared the model to borrowing from a bank: “Different banks offer different rates.
Jelle Buth, co-founder of market maker Enflux, told Cointelegraph that the loan option model is not unique to the well-known market makers like DWF and Wintermute and that there are other parties offering such “predatory deals.”“I call it information arbitrage, where the market maker very clearly understands the pros and cons of the deals but is able to put it such that it’s a benefit.
One of the most popular and misunderstood offerings in the market-making world is the “loan option model.” This is when a project lends tokens to a market maker, who then uses them to create liquidity, improve price stability, and help secure listings at a cryptocurrency exchange.
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