6 Red Flags to Watch When Choosing a Market Maker

Most founders don't realize they picked the wrong market maker until the liquidity is already gone.

And when it's gone, it's gone in the worst possible moment: the first sign of volatility, when spreads widen, when your community is refreshing the chart every 10 seconds wondering why the token suddenly "looks dead."

If you've seen this before, you know how it feels. If you haven't, you really don't want to.

This article is long — intentionally long — because the decision you make here affects everything after listing: your treasury, your token's reputation, your community's trust, your exchange relationships, your mental health, all of it.

I've broken it down into something you can read without stress. Plain language. Real examples. No hype. No jargon gymnastics.

Let's talk about what really happens behind the scenes of crypto market making, and why so many projects end up hurt by the people they hired to "protect" their liquidity.

Why Market Makers Matter More Than Founders Expect

Before jumping into the red flags, let's get clear on why this topic is so sensitive.

When a token goes live, it enters a completely different world. A world where one bad market maker can:

• Distort price action
• Damage exchange relationships
• Scare your early holders
• Drain your liquidity reserves
• And, worst of all, slow down adoption before the product even takes shape

You can build a token with solid fundamentals, a real mission, engaged users, a clear roadmap — and still lose everything if the liquidity support isn't handled well.

Most founders think "market making" means keeping the chart clean. It's not.

It's about market health: smooth execution, predictable slippage, consistent quoting, and a structure that doesn't punish you for your own token supply.

Good market making is invisible. Bad market making is painfully visible.

And unfortunately, a lot of the industry operates in the dark.

You don't notice the issues until the order books thin out and the spread jumps to 3%… then 5%… then 12%.

Suddenly your Telegram mods are firefighting questions about "rug," "MM manipulation," "project dead?" — all while your market maker is quiet.

Founders deserve better clarity. So here it is.

Red Flag #1: They Vanish During Volatility

There's no more revealing moment in a market maker's behavior than when the market gets loud.

A real market maker stays active:

• They quote both sides, even when the spread widens
• They stand in the book
• They update orders
• They don't wait for the chaos to "settle"

A bad one disappears. You'll see it instantly:

• Liquidity thins
• Spreads blow up
• Charts show gappy candles
• Community panic rises
• Exchanges start noticing irregular behavior

The truth is simple: If a market maker only performs under perfect conditions, they are not a market maker. They're a liquidity tourist. They're there for the calm seas, not the storms.

Volatility exposes intentions. When the market moves fast, someone needs to maintain structure. When the spreads widen, someone needs to keep making the book look like a real tradable asset. When your holders are watching price dip aggressively, someone needs to prevent an ugly liquidation cascade.

If your market maker isn't present in that moment, you're dealing with an inventory manager — not a liquidity partner.

Some firms will defend this behavior by saying: "We paused quoting to manage risk."

Fair, but that's not market making. If you're paying for liquidity support, you shouldn't be alone in the fire.

You know who sticks around when volatility hits? The partners who believe in long-term relationships, not short-term comfort.

Red Flag #2: Token Loan Deals That Push All Risk to You

Let's talk about one of the most common traps in crypto market making: the "token loan."

It's pitched as a friendly deal: "No upfront payment. Just loan us tokens, we'll handle liquidity."

Founders hear that and think: Great. No cash burn. Low friction. Seems fair.

But open the hood and you'll often find the same structure:

• You provide the tokens
• They trade with them
• They keep the upside
• You take the downside
• And their risk is basically zero

If the deal goes bad? You're the one left holding the bag. Literally — because you gave them the bags.

We've seen this with dozens of teams who later came asking how to rebuild after their "partner" unwound positions directly into their liquidity. Some didn't even realize it until the treasury team connected the timestamps.

Token loans aren't inherently bad. But token loans designed to remove all downside from the market maker while placing all potential loss on the project? That's a red flag you can spot from space.

If they don't share risk → they don't share responsibility. If they don't share responsibility → you're their inventory, not their partner.

A good structure always includes shared exposure. A bad one feels "free" at first… then costs more than you expect.

Red Flag #3: "Guaranteed Volume" Claims

This one is almost comical because every legitimate market maker knows the rule: No one guarantees volume. Ever.

If they're promising:

• Daily volume targets
• Fixed weekly numbers
• Specific chart behavior
• Linear upward activity

…you're not talking to a market maker. You're talking to a vendor selling wash trading.

There's no way around it. Guaranteed volume = fake volume.

And aside from being ethically questionable, it carries real consequences:

• Exchanges can flag your trading pairs
• Some will warn you quietly
• Some will delist you publicly
• Some will place your project under surveillance without telling you

You know what's even more dangerous? Inflated expectations.

Guaranteed volume creates a fake sense of success. Teams think they're "trending." Investors think the token is "moving nicely." But all of it is empty calories.

Volume is supposed to be a result of healthy liquidity and real demand. Not a product you buy in a monthly package.

If the offer includes anything like:

• "Guaranteed 10M volume daily"
• "Guaranteed trending on X exchange"
• "Guaranteed top pair ranking"

…just walk away. Real market makers guarantee depth, not drama.

Red Flag #4: Zero Transparency

You should never have to chase your liquidity partner for reporting. The data should simply appear.

If you don't see clear reporting in the first 30 days, something is off.

You should get:

• Order book screenshots
• Slippage metrics
• Spread stability reports
• Volume quality breakdown
• Inventory movement (at least structurally)

You need this information for one reason: You can't manage what you can't see.

Some firms delay reports on purpose. Some provide sanitized PDFs that hide actual order activity. Some provide nothing at all, relying on the founder "not wanting to look too picky."

But transparency is not optional. Your token is a public asset. Its liquidity behavior affects everyone: holders, exchanges, investors, community, team.

You deserve clarity. If they don't want you to see the data, assume it's because you won't like it.

Red Flag #5: Weak Performance During Actual Market Crashes

Any market maker can look good when BTC ranges, when volatility is low, when liquidity is calm.

The real question is: How did they behave during the stressful months?

Pick any of the big ones:

• March 2020
• May 2021
• LUNA collapse
• FTX collapse
• Post-ETF sell-offs
• The 2024 liquidations

Real market makers stayed present. They kept quoting. They kept spreads stable. They kept markets functional.

Bad ones disappeared entirely.

You can ask them directly:

• "How did you perform during May 2021?"
• "What happened to clients during the crash last month?"
• "How do you behave when spreads move beyond normal?"

If the answer is vague, generic, or full of excuses, that's your signal.

Past behavior under pressure is the best predictor of future reliability.

A good market maker builds systems that function in turbulence. A bad market maker builds excuses for turbulence.

Red Flag #6: Manufactured, Artificial Activity Patterns

Fake activity can do real damage.

If you see:

• Unnatural spikes during low-volume hours
• Circular trading between the same wallets
• Sudden bursts of "perfect" volume
• Identical order sizes repeating every few seconds
• Volume without counterparties
• Order books that look like a copy-paste template

…you're looking at synthetic behavior. And this isn't just embarrassing. It's dangerous.

Exchanges can detect these patterns. Compliance teams can escalate it. Some blockchain analytics firms track unnatural activity. Even users can tell when the chart "feels fake."

Teams who rely on artificial volume often end up with damaged relationships and lower trust from future exchange partners.

Here's the real risk: Once your project gets flagged for manufactured volume, it stays in the system. Exchanges talk to each other. Analysts share notes. Your token may face unexpected resistance when you try to list elsewhere later.

Healthy activity comes from real liquidity. Everything else is a liability dressed up as "support."

Why So Many Projects Miss These Red Flags

Most founders aren't liquidity experts. They shouldn't have to be.

They're building products. Hiring teams. Managing communities. Meeting investors. Juggling legal, treasury, tokenomics, design, marketing — all at once.

Market making is specialized. It's easy to assume every firm operates similarly.

But the gap between a real market maker and a "market maker" is massive.

Some teams trust too quickly. Some don't understand the risk. Some think they "got a good price." Some don't want to ask difficult questions. Some sign too early because they want to launch faster. And sometimes it's just inexperience.

There's nothing wrong with that — this industry is still young, and very few people understand the nuances of liquidity behavior.

That's why clear guidance matters.

What Good Market Making Actually Looks Like

Let's shift to something more positive.

If you strip away the noise, good market making is simple:

• Consistent quoting
• Clear communication
• Fair risk-sharing
• Transparent structures
• No gimmicks, no wash trades
• Focus on market depth, not artificial volume
• Presence during volatility
• Collaboration, not extraction

A good MM feels like a partner. A bad one feels like a vendor. A terrible one feels like a liability.

Good liquidity support protects your reputation. Bad liquidity support destroys it in 24 hours.

If you ever want a quick heuristic, here's one that has never failed: If they talk like a trader, they're probably real. If they talk like a salesman, be careful.

Why Many Teams Switch to BlockAI After the First Crash

That's exactly the moment teams come to BlockAI.

They come after the shock. After the spread collapse. After the charts started looking illiquid. After the first MM stopped responding for hours at a time. After the reports turned out to be useless. After the token loan deal backfired. After the synthetic volume got flagged.

We hear the same stories again and again.

That's why we created a model that doesn't rely on shady structures. We built something founders can trust:

• Real liquidity
• Real support
• Real transparency
• Real reporting
• No guaranteed volume nonsense
• No shady inventory loops
• No artificial spikes
• No disappearing during stress

When you treat liquidity as a long-term system — not a short-term stunt — everything changes.

A Note on the Offer: 1 Week of Free Market Making

If your current market maker has been showing any of the red flags above, even one or two, you may already be feeling the consequences.

That's why BlockAI is offering 1 full week of market making at zero cost for teams who want to review their setup or rescue damaged liquidity.

No traps. No token loans. No volume promises. Just real liquidity support, visible immediately.

If you want to talk specifics, you can reach out directly via Telegram at @Block_AIBot.

This isn't meant to pressure you. It's simply available if you need a safe way to test a healthier model without cost.

Closing Thoughts: Liquidity Is Not a Side Detail — It's Infrastructure

Founders often spend months perfecting their product, token design, pitch decks, branding, research, and community strategy — but only a few days evaluating their market maker.

That mismatch costs more than anything else in the long run.

Your market maker becomes part of your infrastructure. And the wrong one becomes a weakness you can't easily hide.

So treat this decision with the same seriousness you'd apply to:

• Your treasury management
• Your tokenomics
• Your exchange listings
• Your governance
• Your product security

Good liquidity creates trust. Trust creates longevity. And longevity is what matters after the hype cycles fade.

You're building something ambitious. You deserve partners who support that, not partners who drain it.

If you take nothing else from this entire article, take this:

A great market maker protects your token during stress. A bad one disappears during stress.

And you will only know which one you picked when it's too late — unless you look for the red flags now.