How OTC Token Trading Discounts and Hedging Strategies Harm Retail Traders
Institutional investors and market makers are snapping up tokens via private OTC token trading at roughly 30% discounts with three- to four-month lock-ups, then hedging price risk by shorting equivalent perpetual futures. This structure locks in predictable annualized yields of 60%–120%, regardless of token price swings. Enflux co-founder Jelle Buth notes that venture funds and market makers routinely secure discounted token allocations and offload risk onto retail traders once tokens unlock. Retail investors face hidden sell pressure, lack transparency on discount terms, and bear funding-rate costs on perpetual positions. Negative funding rates and opportunity costs further erode returns. Despite these downsides for retail, OTC deals remain popular because they provide instant liquidity for projects and stable returns for institutions. However, the information asymmetry and looming unlock-driven sell-offs distort market prices and disadvantage ordinary traders.
Bearish
The prevalence of discounted OTC token trading and hedging by institutions creates looming sell pressure and erodes retail traders’ confidence. Information asymmetry over discount terms and lock-up schedules distorts fair pricing. Historical patterns show token price dips when lock-ups expire, triggering supply shocks. This environment is likely to suppress short-term market rallies and dampen long-term sentiment as retail investors face persistent disadvantage against well-capitalized funds.