Secondary market pitfalls — Million dollar lessons

MyTrade
4 min readJan 5, 2023

Congratulations first to those projects who have raised over a Million dollars from the primary market, you are now stepping into a potential pitfall on the secondary market as many market makers (hungry wolves) are ready to eat away at your million dollar market making funds. The vast majority of entrepreneurs are doing business on the secondary market for the first time, and as a result, they are oblivious to the hazards and con tactics that are associated with it. In this article, we will provide some insights for projects to learn, and we hope that these observations will allow you to save some of the money that you raised from the primary market.

Warning signs and pitfalls that market makers will pitch to you include the following:

  1. We have a successful portfolio of projects that have gone up 10–100x and we can get your token 100x too.

A 100x pump is common in a bull market, but it is suicidal in a bear market because your traders have little buying power, and your own market making funds will have to support the price at 10x or 100x for your early investors to exit. This is the reason why the majority of MM funds run dry within six months, regardless of how much MM funds you give to your market maker.

It is the responsibility of your project to ensure that there is token utility, increase the number of people who use your product, and then gradually increase the total value. Increasing the price of your token by a factor of one hundred without first releasing a product or garnering significant support from the community will simply hasten the death of your project.

2. We can match your MM fund, you put in 1 Million, we put in 1 Million into the MM fund.

OR

3. We can become your lead investor with 1 Million, but we have to be your market maker.

This becomes a “black box” operation since the market makers who provide these agreements will typically want control of your MM funds. It is normal practice to engage in insider trading based on confidential information. Because there are so many traders participating in the loss, the negative effects of this business model are mitigated somewhat while the market is on an upward bullish trend.

During a bear market, the only way a market maker can make money is by making a profit off of your MM fund. They typically make use of an arbitrage bot in order to steal that money over the course of time. Take into consideration the fact that, in addition to the market maker bots, there are other bots that are attempting to steal your MM fund. Did your market maker ever mention to you about arbitrage bots? Did they successfully defend against an attack from those arbitrage bots? Either they lack the skills necessary to safeguard you from arbitrage bots used by third parties or they are using their own arbitrage bots to engage in a blackbox operation directed against you. You must know that arbitrage bots are present in practically every listed project and can be found on most centralized exchanges. If you gave your money to a third party market maker right now, would you still feel safe doing so?

Criteria to look for when choosing your market maker:

  1. Make sure your MM fund is in your own controlled account, your market maker can access it via API with only trading rights. This way you can see all the trade history and behavior of the MM bots. Also the accounting and finances are transparent too.
  2. Self control of your own strategy. If you have to tell your market maker what to do, then there is potential insider trading happening. Ideally, you have a front-end interface where you can control your own parameters for market making.
  3. The cost for market making should be less than $3k/month, those who charge you $10k+/month are because of high referral commissions they need to give out to their referral sources.

Unfortunately, there is no regulation for market makers, and the vast majority of them are just concerned with short-term gains. MyTrade MM is a SaaS Tool that allows projects to do their own Market Making at a fraction of the cost of competitors. It solves many of the pitfalls described in this article and its features are designed for simplicity so anyone can use them. Most projects fail within 6 months of listing on the secondary market and MyTrade MM can help projects elongate their life cycle significantly. Check out MyTrade MM HERE and get a free trial!

MyTrade MM also offers you the opportunity to receive free training on the knowledge and strategies of secondary markets, so get in touch today!

Project Links
Website — https://mm.mytrade.org/

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