A recent study analyzing over 150 cryptocurrency protocols has uncovered a startling lack of transparency regarding market-making agreements. According to the research conducted by a crypto advisory firm, less than 1% of these protocols provide any information about their market-making arrangements, raising significant concerns about the overall transparency in the trading structures of cryptocurrencies.
The study highlighted that only one protocol, the decentralized liquidity platform Meteora, has publicly disclosed its market-making terms, as noted in its 2025 Annual Token Holder Report. This finding underscores the broader challenges investors face in understanding the true nature of token trading.
Key Findings of the Study
The research encompassed a diverse range of sectors, including decentralized exchanges, lending platforms, perpetual futures, layer-1 and layer-2 networks, bridges, and tokens associated with centralized exchanges. The protocols analyzed varied significantly in size, with valuations ranging from approximately $40 million to $45 billion.
Using a binary framework to evaluate transparency, the study assessed the disclosure practices of these protocols against multiple public sources, including Artemis, Token Terminal, Dune, DefiLlama, and Blockworks Research. The results were revealing: a significant transparency gap exists, particularly in how market-making arrangements are communicated.
Connor King, the founder of Novora, expressed the gravity of the situation on social media, stating, “This is the single most consequential transparency gap in the industry. In traditional markets, such material agreements are routinely disclosed. In crypto, every market participant operates without this critical information.”
Investor Reporting Gaps in Crypto
The lack of market-making disclosures indicates a broader issue in investor relations within the cryptocurrency sector. Novora's research noted that while 91% of the protocols examined generate trackable revenue, only 18% provide quarterly updates to their investors, and a mere 8% issue token holder reports. This disparity suggests that, although essential data exists, it is seldom compiled into structured investor communications.
Moreover, despite the slow progress of formal reporting, the third-party analytics infrastructure in the crypto space has matured. Coverage rates have exceeded 85% across major platforms, indicating that the underlying data is accessible, yet rarely utilized in formal reporting.
Variability in Transparency Across Sectors
The study further illustrated that transparency levels vary significantly across different sectors. Perpetual futures protocols and decentralized exchanges tend to lead in terms of disclosure and mechanisms for value accrual. In contrast, layer-1 projects and infrastructure initiatives lag behind, despite having larger market capitalizations.
Concerns Surrounding Market-Maker Deals
The opaque nature of market-maker arrangements has long been a subject of scrutiny in the crypto industry. Critics have pointed out that poorly structured market-making deals, particularly those involving token loan structures, can incentivize detrimental behaviors such as dumping borrowed tokens into the market. The United States Securities and Exchange Commission (SEC) has previously taken action against certain crypto market makers for alleged price manipulation practices.
One common arrangement, known as the “loan option model,” involves projects lending tokens to market makers, who then utilize these tokens for liquidity provision and trading activities. However, this model has been criticized for creating incentives that may lead to price declines, ultimately harming early-stage projects while benefiting market makers.
Conclusion
The findings from this study highlight a critical need for enhanced transparency in the cryptocurrency market, particularly concerning market-making arrangements. As the industry evolves, greater accountability and clearer communication regarding trading practices will be essential for fostering investor trust and ensuring sustainable growth.
Source: Cointelegraph News