Some liquidity providers profit from token lending, putting crypto startups into a death spiral.

BlockBeats News, April 17th: According to Cointelegraph, a suitable market maker can act as a booster for a crypto project, helping it list on major exchanges, providing liquidity, and ensuring the token is tradable. In the market maker field, a popular yet often misunderstood model is called the "loan option model." In this model, the project lends tokens to the market maker, who then uses these tokens to provide liquidity, stabilize prices, and assist the project in listing on crypto exchanges. However, in reality, this model has become a "death sentence" for many new projects.

Behind the scenes, some market makers are taking advantage of this token loan structure to profit themselves. These arrangements are often packaged as "low-risk, high-return," but they actually severely impact the token's price, leaving newly established crypto teams in chaos and struggle. Ariel Givner, founder of Givner Law, stated, "The way it works is: the market maker borrows tokens from the project at an agreed-upon price, under the condition that they will help these tokens list on major exchanges. If they fail to fulfill this commitment, they must repay these tokens at a higher price within a year."

However, what often occurs is that market makers sell off the borrowed tokens, causing an initial price crash. After the token price has been pushed down, they buy back the tokens at a lower price, thus profiting from the process.