Introduction

A market maker just signed an agreement with a token that you are short… well, it just means more liquidity for traders, right?

Suddenly, a day later, the funding rate plummets to -2.5%, and you’re paying over 2500% APR in funding to maintain your short.

Five minutes later, you’re liquidated. How did this happen?

Welcome to the shadowy side of market-making in the crypto world. In this article, we will explore how market making agreements can have a blur line between supportive liquidity provision and manipulative practices. From token loans and embedded call options to skewed order books and aggressive market manipulation, what should projects and traders look out for?