As some altcoins (virtual assets other than Bitcoin) have repeatedly surged more than 100-fold in a short period and then plunged more than 90%, criticism is mounting that a specific group monopolizing spot supply is artificially adjusting spot prices on virtual asset exchanges to reap massive revenue from perpetual futures (no-expiration futures contracts) funding fees. The funding fee is money exchanged like a fee so that long (betting on a rise) and short (betting on a fall) positions remain balanced.
According to the virtual asset industry on the 9th, Siren (SIREN), RaveDAO (RAVE), and LAB have shown sharp rises and falls this year over short spans. The price of RaveDAO, listed on domestic exchange GOPAX, jumped from about 350 won in early last month to as high as 40,000 won on the 18th of last month. It then plunged and is now around 700 won. Siren, which was below $1 in March, rose to about $2.1 on the 17th of last month, and LAB is currently up about 5,800% from its all-time low.
A key characteristic of these virtual assets is that they initially have low market caps and a large share concentrated in a specific wallet. For RaveDAO and Siren, 98% and 88.5% of total circulating supply, respectively, were in a single wallet. There is also a claim that the largest asset wallet related to RaveDAO is the same wallet that holds the LAB supply.
ZachXBT, a virtual asset investigative analyst, said on X (formerly Twitter) that a group suspected of price rigging links the spot and futures markets to generate revenue through funding fees. When the futures price is higher than the spot price, the funding fee turns positive (+) and long positions pay a fee to short positions. When the spot price is higher, the opposite occurs.
Funding fees are paid in intervals of 1 to 8 hours, up to 2%. For example, if the funding fee is -2% per hour and you hold a $1,000 short position, you pay $20 each hour to those holding long positions. If a group monopolizing spot supply takes long positions and then lifts the spot price to make the funding fee negative, it can receive the funding fee every hour.
Virtual assets that soar in a short time mostly plunge. Domestic exchanges do not offer perpetual futures for betting on declines and list only spot, so when prices plummet, investors take losses.