Forward the Original Title ‘How Are Market Makers Distributing Their Holdings in This Round? See What Traps You’ve Fallen Into?’

Single-Sided Liquidity Pools: A Scheme to Profit Without Risk

A classic example of leveraging single-sided liquidity pools to manipulate markets is the recent case of the LIBRA token, which was promoted by the Argentine president. The LIBRA project team set up single-sided liquidity pools on the Meteora platform, specifically LIBRA-USDC and LIBRA-SOL pools. However, they only supplied LIBRA tokens to these pools without adding any USDC, SOL, or other counterpart assets.

Image source: Bublemaps

In a single-sided liquidity pool, if only SOL is added, then as SOL’s price rises, the pool continuously sells SOL in exchange for USDC. Conversely, if only USDC is added, the pool keeps buying SOL when its price drops. Applying this logic to LIBRA, since the pool contained only LIBRA without any USDC or SOL, any buy order for LIBRA would directly push up its price. Without a corresponding sell-side order, this creates an illusion of “only rising, never falling” in the early stages.

Because the project team controlled the majority of LIBRA tokens in circulation during the early phase, they didn’t need to provide real stablecoins or ETH as counterpart liquidity like on Uniswap or other platforms. Instead, they simply placed buy orders at different price levels using their own LIBRA tokens. Since there were virtually no sell orders in circulation, these buy orders were continuously executed, further driving up the price and creating an illusion of prosperity.

Once this “false prosperity” attracted a large number of investors and drove the price to a high level, with sufficient capital injected into the ecosystem, the project team executed their next move—removing liquidity. The stablecoins and other assets that investors used to buy LIBRA were swiftly transferred to pre-set collection addresses. Due to the nature of single-sided liquidity pools, there were no available assets left in the pool for redemption. At this point, investors found themselves unable to sell their LIBRA tokens, while any new buy orders would only further inflate the price of an asset with no real backing. By this stage, the project team had already successfully offloaded their holdings.

Beyond price manipulation, the LIBRA project team also exploited the custom fee functionality of CLMM (Concentrated Liquidity Market Maker) pools. Through this method, they earned an additional $10 million to $20 million in transaction fees alone—similar to the high fees observed in the TRUMP token case.

Mindao, the founder of the DeFi protocol dForce, pointed out that while Uniswap V3 also allows single-sided liquidity, its primary purpose is to improve capital efficiency and cater to professional market makers. In contrast, LIBRA’s strategy relied on complex pool configurations and highly customized settings. This indicates that the primary intention behind LIBRA’s single-sided liquidity pool was not to provide liquidity, but rather to facilitate price manipulation and liquidity extraction.

Buyback News Fails to Break the Consolidation Range

In August 2023, shortly after its TGE (Token Generation Event), the GambleFi platform Rollbit officially announced changes to its tokenomics. According to the update, 10% of Casino revenue, 20% of Sportsbook revenue, and 30% of 1000x leverage contract revenue would be allocated for the daily buyback and burn of RLB tokens. This news initially triggered a price surge, but within two months, the token’s price began to decline steadily. As time went on, community members uncovered a hidden sell-off scheme—the Rollbit team was cycling tokens through the Rollbit Hot Wallet and offloading them to the market via algorithmic sell-off addresses.

Buybacks are typically seen as a mechanism for projects to stabilize the market and increase token value. Under normal circumstances, buyback funds should come from a project’s profits or capital appreciation. However, if the funds originate from the project’s hot wallet—an internal wallet holding a large supply of tokens or funds—then these are not external capital inflows, but rather pre-existing project-owned assets.

If the project team uses its hot wallet funds to conduct buybacks, the money is technically still under their control. When these funds are used to purchase tokens from the market, those tokens might not actually be burned or removed from circulation. Instead, they could simply flow back to the project team through their hot wallet, only to be redistributed to algorithmic sell-off addresses and dumped back onto the market.

As the token price continued to decline, community members began questioning the Rollbit team’s lack of transparency regarding their activities across different blockchains and trading platforms.

A major point of criticism was the unsustainable ratio of selling to buybacks—for every 30% of revenue used for selling tokens, only 10% was allocated to buybacks. This strategy was never designed to truly drive up the token’s value. Instead, it appears to have been yet another carefully orchestrated sell-off scheme by the project team.

Controlling Spot Holdings and Aggressively Profiting from Short Positions

The phrase “If you don’t like it, just short it” once became the highest-winning strategy for internal traders during this cycle. Although newly launched tokens now frequently experience extreme volatility due to high funding rates swinging both ways, since the crackdown on “VC-backed tokens,” most secondary market trading pairs follow the same pattern: a few days of decline, a rapid pump, and then a prolonged downtrend. What many don’t realize is that this, too, is a way to offload tokens, with the core strategy relying on the lack of liquidity in the derivatives market and retail investors’ tendency to chase price movements and panic sell.

The entire process can be broken down into several phases. First, in the initial stage of a new token launch, market makers typically choose not to support the price, allowing early airdrop recipients among retail investors to sell off their holdings. The main goal at this stage is to wash out short-term speculators and clear the way for later operations.

Next, market makers begin preparing for the pump and eventual exit. Before that, they try to control as much of the circulating supply as possible, reducing the available float to ensure that sell orders won’t significantly impact the price. This also limits the ability of traders to borrow the token for shorting. With the circulating supply firmly controlled, market makers can push the price up with relatively little capital, sometimes even triggering a short squeeze. When users see the price rising and start buying spot or opening long positions in the derivatives market, they provide the project team, market makers, and institutional investors with enough buy-side liquidity to begin offloading their holdings in stages.

Once the number of short positions in the market decreases and the price has been pushed high enough, market makers shift their focus to extracting liquidity from the derivatives market. They do this by rapidly driving up the token price to lure in retail traders chasing the pump, creating an illusion of market strength. This surge is usually significant but rarely exceeds the token’s opening price. As open interest in derivatives increases sharply and funding rates turn negative, it signals that market makers have started building short positions.

At this point, while market makers continue gradually selling in the spot market—though profits from this are limited—the real gains come from their short positions in the derivatives market. A large number of retail traders who chased the price increase are now holding long positions, effectively becoming the counterparty to market makers’ short positions. As market makers continue shorting the token through derivatives and offloading their spot holdings, the price begins to decline, triggering a wave of liquidations among overleveraged long positions. This results in a double profit extraction for market makers—first by selling at high prices in the spot market, and then by profiting from the price drop in the derivatives market.

Retail Investors Can’t Win the Staking Game

There was a time when the launch of a staking mechanism for a token was considered a positive development in a project’s roadmap. The original intention was to incentivize users to participate in network maintenance, reduce circulating supply through locked-up tokens, and enhance scarcity. However, many project teams have turned this mechanism into a cover for cashing out and offloading their holdings.

By offering high staking rewards, project teams attract investors to lock up large amounts of tokens. On the surface, this appears to reduce market supply and stabilize the token price. However, in reality, most floating supply gets trapped in staking contracts, making it impossible for participants to exit quickly. Throughout this process, the project team and stakers are in an asymmetric information environment. While retail investors lock their tokens away, project teams can freely sell their holdings on the market. Even if large holders or the project team themselves choose to stake, they still benefit from the high staking rewards, which they can continuously dump into the market for profit.

Another common scenario unfolds when the staking period ends. As investors rush to sell their unlocked tokens out of panic, the project team quietly buys them up at low prices. Once market sentiment stabilizes and prices recover, they cash out again. At this stage, seeing the price increase, retail investors rush back in, unaware that the major players have already completed their exit strategy, leaving them holding overpriced tokens.

Looking at all these sell-off strategies, they are ultimately a game of market expectations and investor psychology. To survive in such an unpredictable market, retail investors need to think like market makers. This doesn’t mean manipulating the market like the whales do, but rather developing independent thinking, avoiding emotional decisions, anticipating risks early, and formulating clear strategies in advance.

The market is an amplifier of emotions—only those who remain calm and rational can avoid becoming exit liquidity. Next time you hear terms like “buyback,” “staking,” or “single-sided liquidity pools,” it’s worth being extra cautious. Recognizing these tactics in time might just help you avoid falling into a well-crafted trap set by project teams. What other exit strategies have you seen? Share your thoughts in the comments!

Disclaimer：

1. This article is reproduced from [BlockBeats]. Forward the Original Title‘How Are Market Makers Distributing Their Holdings in This Round? See What Traps You’ve Fallen Into?’. The copyright belongs to the original author [shushu], if you have any objection to the reprint, please contact Gate Learn team, the team will handle it as soon as possible according to relevant procedures.

2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.

3. Other language versions of the article are translated by the Gate Learn team, not mentioned in Gate.io, the translated article may not be reproduced, distributed or plagiarized.