Binance, the world’s largest cryptocurrency exchange by trading volume, released a new guidance on Wednesday warning crypto projects and traders about market-making practices that can distort prices, drain liquidity, and erode community trust. The blog post outlines six behavioral red flags that may indicate manipulation or misaligned incentives in market-making arrangements.
The Structural Role of Market Makers
Market makers play a crucial role in crypto markets by posting continuous buy and sell orders on trading pairs, tightening spreads, and absorbing price swings, particularly for assets with lower trading volumes. Without them, thin markets become harder to navigate. Binance stated that the guidance is intended to help distinguish legitimate market making from activity that harms orderly trading.
The Six Red Flags
1. Selling Ahead of Token Release Schedules: When a market maker offloads tokens ahead of agreed timelines, it can signal misaligned incentives or weak internal controls, putting downward pressure on prices before the broader market has a chance to absorb supply.
2. One-Sided Trading Behavior: Persistent sell-side orders without matching buy-side activity indicates that the market maker is distributing tokens rather than maintaining two-sided liquidity. Healthy market making supports both sides of the order book.
3. Coordinated Sell-Offs Across Multiple Exchanges: Large simultaneous deposits and sales across platforms—beyond normal rebalancing—can indicate organized distribution rather than genuine liquidity management.
4. High Trading Volume Without Price Movement: High volume that produces little or no price movement may reflect wash trading, where artificial trades create a false impression of liquidity.
5. Thin Order Books: When liquidity is shallow, small trades can generate outsized price swings, making assets easier to push artificially higher or lower. Genuine volume needs meaningful order book depth behind it.
6. Profit-Sharing and Guaranteed-Profit Arrangements: Binance specifically prohibits profit-sharing and guaranteed-profit arrangements with market makers. Any token loan agreements must clearly define how those tokens can be used.
Recommendations for Traders
Binance advises traders to assess order book depth rather than relying solely on volume figures, watch for price behavior that doesn’t track volume in expected ways, and avoid rushed decisions during early-stage listings or fast-moving markets.
Compliance Expectations for Token Projects
For projects launching or listing tokens, Binance outlined six compliance expectations: strict adherence to token release schedules, prohibition of large-scale token offloading, full disclosure of market maker identities and contract terms to listing platforms, rigorous vetting of market-making partners, clear written mandates covering trading parameters and compliance obligations, and continuous post-listing monitoring.
The exchange said it actively monitors market-making activity and will blacklist market makers who breach its rules. Projects and users with information about suspected misconduct can report it to audit@binance.com.
Regulatory Context
The guidance comes as regulators in multiple jurisdictions continue to expand enforcement around market manipulation in digital asset markets. Several enforcement actions over the past two years have targeted coordinated trading schemes involving market makers and token issuers working together to inflate volumes or support prices artificially. Binance emphasized that orderly markets depend on participants acting in ways that reflect real supply and demand—and that protecting users from manipulative behavior remains a core platform priority.