Crypto Transparency Lacking in Market-Maker Agreements
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A recent analysis of over 150 cryptocurrency protocols has uncovered a significant lack of transparency in market-making agreements, highlighting a critical issue for token trading practices. The investigation reveals that less than 1% of these protocols openly share their market-making terms, which are vital for understanding trading dynamics.
This study, led by the crypto advisory firm Novora, identified only one protocol, the decentralized liquidity platform Meteora, that provided any detailed disclosure on its market-making operations. This disclosure was part of their 2025 Annual Token Holder Report.
The research encompassed various sectors such as decentralized exchanges, lending platforms, perpetual futures, layer-1 and layer-2 networks, and centralized exchange tokens, with valuations ranging from approximately $40 million to $45 billion.
Novora employed a binary transparency framework to evaluate these protocols, focusing on their disclosure practices and the extent of third-party data accessibility. The assessment utilized public sources, including Artemis, Token Terminal, Dune, DefiLlama, and Blockworks Research.
The findings indicate a significant transparency gap in the crypto industry, as highlighted by Novora’s founder, Connor King, who expressed concern that material agreements are typically made available in traditional financial markets, yet remain hidden in the crypto sector. According to him, this lack of information leaves every market participant in a disadvantaged position.
Additionally, the research points out a broader deficiency in investor relations within the crypto space. While 91% of the reviewed protocols were found to have revenue generation capabilities, only 18% released quarterly updates, and a mere 8% published token holder reports. This discrepancy suggests that vital data exists but is seldom organized into formalized investor communications.
The maturity of third-party analytics platforms, which boast coverage rates above 85% across major systems, implies that comprehensive data is readily available yet seldom structured within reporting norms.
A closer look at the various sectors reveals inconsistent transparency. Perpetual futures protocols and decentralized exchanges generally excel in providing disclosures and mechanisms for value accrual, whereas layer-1 and infrastructure projects often lag behind, despite their larger market capitalizations.
Opaque market-making arrangements have been a point of contention in the cryptocurrency realm. Critics argue that poorly designed structures can incentivize negative behaviors, such as flooding the market with borrowed tokens. The U.S. Securities and Exchange Commission (SEC) has previously taken action against certain crypto market makers for alleged price manipulation.
One common structure under scrutiny is the “loan option model.” In this scenario, token projects lend assets to market makers, who use them for liquidity and trading. Critics maintain that this can create harmful market conditions, manipulating prices in favor of market makers while compromising the liquidity and performance of nascent projects.
This research underscores a pressing need for improved transparency and more robust investor relations in the cryptocurrency sector, as stakeholders grapple with the implications of currently opaque market-making practices.
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