Cowboy Market Makers Corrupt Crypto Markets, But The Good Guys Are Fighting Back

Market makers in cryptocurrency markets play a crucial role by ensuring liquidity, enabling seamless trading of digital assets. Their function is straightforward: match buyers with sellers to maintain market efficiency. Yet, some have strayed from ethical practices, engaging in manipulative tactics like wash trading, volume inflation, and pump-and-dump schemes.

These deceptive activities distort market integrity, making it difficult for investors to discern genuine trading activity. Studies highlight the severity of the issue—Bitwise admitted in 2019 that 95% of its reported volume was artificially generated, while a 2022 NBER study found wash trading accounted for 70% of activity on certain decentralized exchanges.

Despite the tarnished reputation of some bad actors, legitimate market makers continue to uphold fair practices. The industry is witnessing a pushback against manipulation, with increasing scrutiny and regulatory efforts aiming to restore trust in crypto markets.