On the cryptocurrency market, the OM token experienced astronomical climb and crash. This debacle erased billions in market capitalization and exposed the lack of a universal standard for data reporting across the ecosystem. For only a brief moment, OM was a top-25 asset by market capitalization. It turned out that less than 1% of the total token supply was actually liquid. The crisis has led to demands for increased transparency and tougher listing standards on large exchanges such as Binance and Coinbase.
The Anatomy of the OM Scheme
According to the lawsuit, Mantra, the organization behind the OM token, engaged in wash trading to inflate liquidity metrics by gaming the self-reporting frameworks utilized by data aggregators. Market makers coordinated with Mantra to fake trading volume. By misleadingly inflating the circulating supply and the trading volume, they were able to falsely inflate the token’s value and boast its market activity.
This manipulated operation did a great job of hiding the true weakness of the OM token’s real trading depth. This artificial liquidity produced a false illusion of market demand that, as we witnessed, was, in fact, fleeting.
The Unraveling and its Aftermath
That illusion was broken when a big enough OM holder tried to liquidate their position. The market's inability to absorb the sale exposed the artificial nature of the token's liquidity, leading to a dramatic price crash and a significant loss of value for investors.
The experience was a painful reminder of just how easily the emerging cryptocurrency market could be manipulated. Most importantly, it shone a spotlight on the vital importance of getting data reporting right. As the fallout from OM’s collapse continues, the incident has put a spotlight on the data reporting standards that dictate the entire industry.
Calls for Increased Transparency
In response to the OM debacle, market participants are calling for more disclosure around the creeping market making and proprietary trading activities. One of the most popular recommendations has been to mandate disclosure of all market-making contracts. This should be a prerequisite for any token to be listed on a top exchange.
This measure is intended to help investors better understand the underlying economic forces impacting token prices and trading volumes. Stakeholders can more easily identify the relationship between token issuers and market makers. Such foresight allows them to better measure the real liquidity and market depth of a digital asset.
