Binance uses AAVE, JUP, and others as leverage, aiming to tear apart market makers

Author: Zhou, ChainCatcher

On March 31, Binance announced that starting April 6, it will update the assessment trading pairs for the "Spot Small Coin Liquidity Enhancement Program," aiming to improve the liquidity and trading efficiency of certain small coin trading pairs in the spot market.

This time, 36 new assessment trading pairs will be added, and 15 trading pairs will be removed.

I was a bit surprised when I saw this list.

AAVE, MORPHO, ALGO, JUP, LDO, 1INCH, and others—multiple altcoin blue chips that were once recognized by the market, ranked high in market capitalization, and had strong community engagement, now appear on Binance's "liquidity assessment list," alongside a bunch of lesser-known small coins.

How did these once-mainstream coins fall to such a level of insufficient liquidity?

Before 1011, this system was already broken

In fact, the core mechanism of Binance's announcement is to set assessment thresholds for market maker behavior on specific trading pairs.

Trading pairs that do not meet the standards will face tiered liquidity management, rather than being directly delisted.

Projects like AAVE, LISTA, and JUP, which have protocol revenue and on-chain ecosystem support, are unlikely to be easily delisted. Especially since LISTA is deeply embedded in the BSC ecosystem and is highly tied to Binance's interests; the probability of delisting can be almost ignored unless there is a major risk event.

The real highlight lies in the rebate rate structure.

In the original market maker system, the order placement party could receive a maximum rebate of -0.008% on transaction fees if their trading volume reached the 1% threshold. In this new plan, the same 1% threshold corresponds to a rebate of -0.010%, creating a 25% difference.

In the market-making industry, a 10 basis point difference in fees is enough to influence capital allocation decisions, and a 25% profit advantage is a considerable incentive for professional market makers.

Binance's move is to attract new participants willing to provide liquidity for these coins with real financial incentives.

There is a premise behind this: the existing market maker system has issues.

The market makers we typically understand are primarily responsible for providing liquidity—continuously placing buy and sell orders, narrowing the bid-ask spread, and maintaining normal market operations.

But this is just the surface logic.

In reality, the core battlefield for traditional market makers is no longer in the spot market. Their more common operation is to control prices in the futures market, with the spot market serving as a tool for offloading.

Project teams lend tokens to market makers as market-making capital. After obtaining the tokens, market makers establish positions on the futures side and gradually offload through the spot market.

In this chain, retail investors are always at the very end. More critically, the agreements between project teams and market makers are opaque—how many tokens the market makers have, the conditions for locking them, and when they can offload are all completely unknown to retail investors.

The "1011" crash was the most intuitive presentation of this system's disorder.

On that day, the total liquidation amount across the network reached $19.1 billion, with over 1.62 million accounts forcibly liquidated, setting a historical record for the crypto market.

The trigger was macro-level—Trump announced a 100% tariff increase on China, putting collective pressure on global risk assets. But what made the decline so extreme was the inherent fragility of the market structure: leading market makers prioritized reducing liquidity support for altcoins when the market turned sharply, concentrating funds on mainstream coins like Bitcoin. Mid and small-cap coins lost their counterparties, fell into a liquidity vacuum, and once stop-loss orders were triggered densely, it was a straight drop with no buffer.

After 1011, Binance faced increased compliance and risk control pressures. In fact, as early as last June, Binance attempted to boost market-making participation for related trading pairs through negative fee incentives, but the effect was limited, and the issues have persisted.

According to RootData's transparency ranking of crypto market makers, leading institutions like Galaxy Digital, Wintermute, GSR, DWF Labs, Jane Street, and Amber Group all have transparency scores above 70%, placing them in the industry's top tier. However, 19 market maker projects still have transparency scores below 60%, with most failing to disclose key information such as team backgrounds, funding situations, or market-making tokens. The uneven transparency is a long-standing reality in this industry.

The disorder among market makers is not an abstract proposition. User @jingouwang888 has outlined six major signals of improper behavior that users and project teams should be wary of: early selling that conflicts with token unlocking plans; large unilateral sell orders without corresponding buy support; simultaneous large deposits and sales across multiple exchanges, exceeding normal rebalancing ranges; significant divergence between trading volume and price trends; small trades triggering large fluctuations under thin liquidity; and apparent trading volume with severely insufficient order book depth…

These are the realities that have repeatedly played out in the altcoin market over the past two years.

Is Binance unaware of these issues? It's just that resolving this matter has never been easy. Crypto KOL Rui pointed out that actively preventing market makers is difficult; Binance's risk control and reporting mechanisms are only temporarily effective, and there will come a day when risk control models are fully understood, making it easy to continue operating under a different guise.

He also noted that for project teams, the large profits ultimately realized are often not substantial; more often, they merely convert their tokens into stablecoins, finding a reason to exit gracefully. For retail investors, the odds of directly competing with this system are extremely low.

The Logic of the Altcoin Spot Market Has Changed

The disorder among market makers is a symptom; behind it lies a more fundamental change.

In the past, project teams needed the secondary market. After launching, someone had to take over, allowing the coin price to rise so that the team and early investors could cash out. Retail investors played the role of "greater fool," which, while not glorious, at least made them real participants.

Now this logic has been severed.

The futures market provides a more efficient harvesting tool. After a project launches, it only needs market makers to cooperate in controlling prices on the futures side; through funding rates and liquidation mechanisms, they can complete cashing out, making retail investors in the spot secondary market optional.

Some worthless project teams even do not need spot liquidity—after harvesting on the futures side, what they get is USDT, not tokens that no one wants to buy.

The identity of retail investors has shifted from being the greater fool to being the target of short selling.

This is the true background of the shrinking spot liquidity for projects like AAVE, ALGO, and YFI. The fundamentals of these projects have not deteriorated significantly; what is truly shrinking is the participation density of the entire spot altcoin market.

Funds and attention are concentrating at both ends: either BTC and ETH or direct on-chain DeFi interactions, while the presence of this layer of CEX spot altcoins is becoming increasingly thin.

As for those lesser-known coins, it's even more pronounced. CryptoQuant analyst Darkfost's data shows that over 40% of altcoins are currently trading at or near historical lows, a proportion that even exceeds the peak of about 38% during the last bear market.

Another dimension is that the vast number of cryptocurrencies directly leads to liquidity dilution, making altcoins increasingly fragile. Data shows that approximately 47 million cryptocurrencies have been issued globally, with 22 million on the Solana platform, over 18 million on the Base platform, and 4 million on the BNB Chain.

The Q1 2026 cryptocurrency market share report from CoinGlass shows that the total trading volume in the spot market was approximately $1.94 trillion, while derivatives trading volume was about $18.63 trillion, with the ratio of derivatives to spot reaching 9.6 times, and this ratio continues to rise during market adjustments.

The more turbulent the market, the less participants engage with spot altcoins, relying more on derivatives for hedging or simply observing.

Crypto KOL @jimohuoshan bluntly stated that many leading altcoins have already fallen to unsustainable levels, and retail investors have little capital left; without buying pressure, the market makers cannot offload their spots and can only rely on futures for operations.

Thus, the liquidity shrinkage of blue chips is partly due to market makers actively withdrawing, and partly a natural result of the entire spot altcoin market bleeding out.

This also explains why there is such a stark contrast in this list.

It is worth mentioning that just the day after this list was released, Binance introduced the Spot Price Range Execution Rules (PRER): orders can only be executed within a dynamic price range, and orders outside this range will be invalidated.

This mechanism directly blocks the operational space for market makers to trigger chain liquidations by creating liquidity vacuums; perhaps a systemic market order is being rebuilt.

Why is Binance Doing This?

As it has developed, Binance is no longer just an exchange; it also plays the role of infrastructure for the crypto market. The decline in market quality directly harms its own position.

Therefore, the combination of measures it has taken is essentially about protecting itself; interpreting this as "industry responsibility" may overestimate its moral attributes.

However, different stakeholders derive different benefits from this matter.

The good days for traditional market makers are narrowing. PRER has blocked the harvesting of liquidity vacuums, and the new fee structure introduces competitors, compressing the space for monopolizing the depth of a particular coin and manipulating prices.

Projects with solid fundamentals may actually benefit. With an improved market-making environment, coin prices can more accurately reflect project value; projects like AAVE and JUP, which have protocol revenue, will at least no longer be casually dumped by market makers under the new system.

For those garbage projects that rely on futures for harvesting, they never cared about spot liquidity, so this policy has little to do with them.

For retail investors, the marginal improvement in the environment is real; if abnormal price manipulations decrease, the probability of being precisely targeted for stop-loss orders also declines. But the fundamental structure of information asymmetry remains unchanged; the black box between project teams and market makers still exists, and a repeat of 1011 may occur in another form.