The Good, the Bad and the Ugly of a Crypto Market Maker

Crypto market maker is a firm or individual that submits both bid and ask limit orders for a specific digital asset to provide liquidity and ensure the smooth running of the crypto markets. They can earn a healthy profit from the spread of each trade they make, as well as enabling traders to buy or sell tokens instantly on their exchange of choice.

Liquidity is key for all financial markets, but it’s especially important in the crypto space. The illiquid nature of crypto trading makes it more difficult for buyers and sellers to find a suitable price for their trades, which leads to high price volatility. This is why market makers play such a crucial role in crypto markets, providing liquidity to both investors and trading platforms.

Market makers have a wide variety of strategies they use to achieve their goals, but there are certain aspects of market making that you should look out for in order to identify a good market maker. For example, most market makers don’t manually place individual orders into the order book of exchanges – they use fully automated trading algorithms that allow them to place thousands of orders every day at high speed and keep human involvement to an absolute minimum.

The Good:

A crypto market maker can help you avoid a liquidity crisis for your ICO by ensuring that you have sufficient volume to attract new investors and create demand for your token. When a new token is launched, the initial market demand can quickly overwhelm the supply of tokens, creating significant price swings. This can cause a number of problems for the project.

The Bad:

Despite the best intentions of market makers, they can’t completely eliminate price volatility. This is particularly true for tokens that haven’t been around for long.

They can, however, reduce price volatility by keeping the order books of exchanges active and removing unfilled buy or sell orders from the system. Additionally, they can reduce the spreads of digital assets by submitting bids for lower prices than the lowest asking price, thus making the asset more liquid and attractive for traders.

The Ugly:

The most common reason for crypto projects to hire a market maker is to ensure that their tokens have sufficient liquidity in the cryptocurrency markets. This is because the tokens will struggle to gain traction and be successful if there’s not enough interest in them for people to trade them.

For this reason, it’s essential to get a crypto market maker onboard early in the development cycle. Companies such as B2C2, Empirica and Auros have built partnerships with early-stage projects, partnering with them to ensure sufficient liquidity and accelerate ecosystem growth through long-term partnerships.

Their business model is based on Key Performance Indicators, which give their partners greater confidence in their ability to deliver the required levels of liquidity and price stability for their tokens.

They have a team of traders, analysts and managers drawn from prestigious firms such as Goldman Sachs, Deloitte and McKinsey. They have experience trading on both centralized and decentralized exchanges, which helps them achieve a high degree of operational efficiency.

Posted in: Finance