How did the dealer distribute the goods in this round? Let's see what pitfalls you've encountered

Author: shushu, BlockBeats

The market has been continuously declining, and many altcoins have even fallen to the point of no return. Many believe that a bear market has arrived. The market adjustment period is often a stage of concentrated risk release, but it also contains opportunities for investors to enhance their understanding and accumulate strength. Reviewing this market cycle, various exit strategies employed by different market makers have emerged, and the meticulously designed selling techniques are worth our in-depth analysis.

Traditional market manipulation theories suggest that market makers operate through four main stages: accumulation, price increase, consolidation, and distribution. However, the core essence always lies in the precise control of market participants' emotions and behaviors. Through price fluctuations and the passage of time, market makers can subtly influence retail investors' decisions, ultimately maximizing their own interests.

So, in a complex and ever-changing market environment, how should retail investors effectively identify market maker selling signals? How can they enhance their risk awareness and avoid falling into traps? BlockBeats has summarized typical selling tactics, including unilateral liquidity pools, false buybacks, spot control contracts, and high-yield staking, based on community discussions for readers' reference.

Adding Unilateral Liquidity Pools, Making a Profit with Empty Hands

The most typical operation of the unilateral liquidity pool selling method was the LIBRA token, which was recently promoted by the President of Argentina. The LIBRA project set up unilateral liquidity pools for LIBRA-USDC and LIBRA-SOL on the Meteora platform, meaning they only added LIBRA tokens to the pool without adding any USDC or SOL as counterparty assets.

Image source: Bublemaps

The operation of a unilateral pool is that if only SOL is added, when the price of SOL rises, it is equivalent to continuously selling SOL for USDC. If only USDC is added, then when the price of SOL falls, it continuously buys SOL. Applying this logic to LIBRA, since the LIBRA pool only contains LIBRA and no USDC or SOL, any purchase of LIBRA will directly push up the price because there is no selling counterparty, creating an early illusion of "only rising, not falling."

Since the project party controlled the vast majority of circulating LIBRA tokens in the early stages, they did not need to provide real stablecoins or ETH as counterparty assets like platforms such as Uniswap. The project party only needed to place buy orders for their LIBRA tokens at different price levels. With almost no circulating sell orders in the market, these buy orders would continuously be executed, further pushing up the price and creating a false sense of prosperity.

When the "false prosperity" attracted a large number of investors, and the price was pushed to a high level with sufficient funds injected, the project party would begin the next step—removing the pool. They would quickly transfer the stablecoins or other assets invested by previous investors when purchasing LIBRA to a pre-set collection address. Due to the uniqueness of the unilateral liquidity pool, there are no assets available for redemption in the pool, and at this time, investors are essentially unable to sell LIBRA. Any new purchase operation would only further push up the price that lacks actual support, and the project party would have completed their selling objective.

In addition to manipulating prices, the LIBRA project party also utilized the custom fee function of CLMM pools. Through this method, they earned an additional fee of over ten million to twenty million dollars throughout the process, which is similar to the high fees during TRUMP's time.

Moreover, Mindao, the founder of the DeFi protocol dForce, analyzed that although Uniswap V3 also provides unilateral liquidity functions, its main purpose is to improve capital efficiency and meet the needs of professional market makers. The key to LIBRA lies in its complex pool settings and high customization, which means that the design intention of its unilateral liquidity pool is not to provide liquidity but to facilitate subsequent price manipulation and liquidity withdrawal.

Buyback Good News but Fails to Break Through the Consolidation Range

In August 2023, shortly after the TGE, the GambleFi platform Rollbit officially announced changes to its tokenomics. 10% of Casino revenue, 20% of Sportsbook revenue, and 30% of 1000x contract revenue would be used for daily buybacks and destruction of RLB. After this news was released, the token price surged, but just two months later, the token price began to decline continuously. Community users gradually discovered a hidden "selling" operation behind it—the Rollbit team was washing tokens through the Rollbit Hot Wallet and then selling the tokens to the market through algorithmic selling addresses.

Buybacks are usually seen as a means for project parties to stabilize the market and increase token prices. Normally, the funds for buybacks should come from the project party's profits or capital appreciation. However, if these funds come from the project party's "hot wallet"—an internal wallet used to store a large number of tokens or funds—then these funds are not external capital flowing into the market but rather funds pre-held by the project party.

Assuming the project party invests funds from their hot wallet into the buyback market, these funds still belong to the project party. When the project party uses these funds to purchase tokens in the market, they may not actually be destroyed or disappear but rather return to the project party. The repurchased tokens may flow back through the project party's hot wallet to their controlled algorithmic selling addresses, re-entering the market.

Token prices continue to decline, and community members question the Rollbit team's lack of transparency across different chains and markets.

The method of "selling 30% and buying back 10%" cannot truly and effectively increase the token price but is yet another carefully orchestrated selling scam by the project party.

Spot Control, Contract Short Selling Harvesting Madness

"I don't like it, you can short it" once became the highest winning trading method in this round. Although new tokens now often have rates shooting up and down, since the "VC token" crusade began, most secondary trading targets first experience a few days of decline, followed by a rapid rise, and then enter a long period of decline. Little do they know, this is also one of the selling methods, focusing on exploiting the lack of liquidity in the contract market and the psychology of retail investors chasing highs and cutting losses.

The entire process can be summarized in several stages: First, in the early stages of a new token's launch, market makers usually choose not to support the price, allowing early airdrop recipients to sell off. The main purpose of this stage is to wash out short-term speculators and create space for subsequent operations.

Then, market makers begin to prepare for price increases and selling. Before this, they will try to control the spot chips as much as possible, reducing circulation to ensure that sell orders cannot have a substantial impact on the price while also limiting the possibility for short sellers to borrow tokens. With the spot chips firmly controlled, market makers can use relatively little capital to raise prices, even triggering a short squeeze. When users choose to buy in the spot market and open long positions in contracts, it accumulates enough buyers for the project party/market makers/institutional investors to sell in batches and start harvesting again.

When the short positions in the market decrease and the price is pushed to a certain level, market makers begin to harvest liquidity in the contract market. They quickly raise the token price to attract retail investors to chase the rise, creating a false sense of prosperity. This wave of price increase is usually considerable but generally does not exceed the opening price. Subsequently, the open interest in contracts significantly increases, while the funding rate begins to turn negative, signaling that market makers are starting to build short positions.

Finally, the operators gradually sell in the spot market. Although this part of the profit is limited, more importantly, they have gained sufficient exit liquidity through short selling in the contract market. A large number of retail investors become long positions while chasing the rise, providing counterparty orders for market makers' shorts. As market makers continuously increase short positions in the contract market and sell in the spot market, the token price begins to decline, leading to a large number of long positions being liquidated, thus achieving a double harvest.

Small Retail Investors Can't Play the Staking Game

Once, launching staking for a token was seen as a positive announcement in the project's operational rhythm, intended to incentivize users to participate in network maintenance, reduce market circulation through locking, and enhance token scarcity. However, many project parties have used this mechanism as a cover for actual selling and cashing out.

Project parties attract investors to lock up a large number of chips through high-interest staking rewards. On the surface, it seems they hope to stabilize the token price by reducing market circulation, but the actual result is often that most floating chips are trapped in the lock-up and cannot exit in time. In this process, project parties and retail investors who choose to stake are in an information asymmetry environment. On one hand, they can sell at will; on the other hand, even if project parties or large holders choose to stake, they will reap high staking rewards and continue to dump.

Additionally, there is another scenario where when the staking period ends, investors begin to panic sell tokens, while the project party absorbs chips at low prices. Once market sentiment stabilizes and prices rise, they cash out. At this point, investors flock in under the illusion of rising prices, but the main players have already completed their selling operations, leaving behind those who bought in at high prices.

Looking at the above selling methods, their essence is nothing but precise control and game of market expectations and investor psychology. To survive in an unpredictable market, retail investors need to possess the mindset of market makers. The so-called "mindset of market makers" does not mean manipulating the market like them but rather having the ability to think independently, not being influenced by market emotions, being able to anticipate risks in advance, and formulating corresponding response strategies.

The market is an amplifier of emotions; only by maintaining calm and rationality can one avoid becoming a target for harvesting. Next time you hear terms like "buyback," "staking," or "unilateral pool," it might be wise to be more vigilant, as it could help you avoid the carefully designed "traps" set by project parties. Feel free to share in the comments any other selling methods you know!