Market makers, also known as liquidity providers, play a significant role in financial markets. For early stage crypto projects, they fill liquidity gaps, and in so doing, help them to navigate through critical development phases.
However, the traditional loan-based market making model has faced significant criticism, with concerns raised over its tendency to become exploitative. In a recent survey with over 400 projects selected across the top 500, top 100 and top 3000 on CoinMarketCap(CMC), this model was criticized for potentially harming projects by draining liquidity and disproportionately benefiting market makers at the expense of projects and investors.
In this interview with Olayimika Oyebanji, Ange Labs’ Head of BD (Oscar) and CFO (JD) provided valuable insights into the emerging retainer-based(profit-sharing) model in market making, contrasting it to the more prevalent loan model.
Can you briefly tell us about yourselves and your route to web3?
Oscar: To speak about us briefly – our large team includes experts from various niches, including traditional finance and exchanges, professional traders with many years of experience in various companies, top marketers and developers, experts in tokenomics and mathematical models, people with a large investment background. Each of us has many years of experience, both in Web2 and in the Web3 industry.
Apart from liquidity shortages, what are the other driving factors that lead early-stage crypto projects to seek market-making services?
JD: In fact, there are many factors. For example, the vast majority of crypto projects understand that without professional Market Makers it is simply impossible for them to comply with all the rules and conditions of the exchanges, in terms of filling the order books, in terms of spread, especially for large exchanges, where any shortcoming can result in delisting (and everyone knows that getting onto a strong exchange requires a lot of work and a lot of money).
No project in its right mind would risk delisting on exchanges; it would be easier for them to hire professionals in this niche for a relatively small fee. Moreover, top Market Makers also help to protect projects as much as possible from all sorts of attacks from arbitrage bots, sniper and sandwich bots. And some teams, like our Ange Labs, also help with connections, with VCs, with Launchpads, with marketing, with fast track listing on exchanges and so on.
And there are actually a lot of such points, the easiest way to explain is with the example of a Lawyer in any company – he does his professional work, documents, etc., while the company itself does its work in parallel, development, marketing, etc. Everyone does his own thing, where exactly he is an expert. The same is with Market Makers – they are hired as experts in the field of professional trading.
Can you take us through the loan-based market making model?
Oscar: As soon as Market Makers realized that this was a real gold mine for them and a way to make money quickly, the Loan Model immediately appeared on the market. The traditional loan-based model is often used by projects who do not have sufficient funding to facilitate trading of their tokens.
As a rule, it is very beautifully justified and imposed on projects, sometimes beautifully named, for example, “Liquidity Provider”, “Investments in the project”, “Options Model” and so on and so forth. And projects are happy to fall for this bait. In our philosophy, we categorically refused to use this toxic method, because it kills all projects and the value of the token.
What are the criticisms leveled against the loan-based model?
JD:If we speak very briefly and understandably for the average person, then this model is notorious for large token dumps, as the market maker is incentivized to drive the token price down in order to repay the loan, by selling the token at the highest price they can.
Your project is allegedly invested in, but in reality you do not see these funds, they are completely under the control of MM and here begins the sleight of hand, a competent game for a fall and against the project, because it is very profitable according to Strike Terms. Thus, MM pumps out all the liquidity, all the profit from your project, and the cost of the token rapidly falls down, it is enough to look at hundreds of launches according to this model on Cryptorank or CMC.
All these projects now look depressing, despite sometimes top exchanges and Tier-1 VCs, while MM made a lot of money on this. And the worst thing is that then all the complaints come to the project founders from investors, from the community, from exchanges – everyone thinks that the Project or the Project Team is bad and few people think that the real reason was in MM and in the Loan Model.
Can you justify your preference for the retainer-based model as an emerging alternative to the existing model?
Oscar: As an organization, we use a retainer fees model with adequate monthly fees and % from clear profit. This enables us to achieve good results by profit, by ROI and by reviews. We strongly believe in a win-win for the project, investors, community etc.
In this model, we are not interested in playing against the project, on the contrary, we are extremely interested in greater profits of the projects, in the development of the token, in order to get our percentage. Our focus is in the long-term trajectory and achieving milestones with the project for many years, in contrast to the immediate benefit of the loan model.
Having seen the reviews from your previous works, can you explain your modus operandi?
Oscar:We have two large departments within the team. One of the departments deals with and helps exclusively with Infrastructure and Fundamental projects. The other department deals exclusively with MEME tokens, since this is also a huge market with completely different operating principles, but we have gathered real experts here and in 2024-2025 helped with the launch of many large projects.
As for restrictions, we do not work with companies from the USA and countries where it is prohibited. Well, naturally, we try to select high-quality projects as much as possible, although we certainly can’t get into the heads of the founders.
Any parting words?
Oscar and JD: Make it a point of duty to choose your Market Maker carefully because the fate of your entire project may depend on it. Endeavour to explore the retainer-based(profit-sharing) model as it offers the proven solution to addressing liquidity shortages.
