Any kind of market needs to be made, right? When an asset gets listed on an exchange with an empty order-book in the beginning, there is no chance you can fill any (market) order. So to provide such liquidity crypto market makers come in and support projects with unique algorithms to provide advanced orders to the order-book on centralized exchanges.
Crypto Market Makers – Requirements
Generally the job of any crypto market maker is to provide liquidity in order to fulfill certain requirements requested by either an exchange, a client who looks for market making or fund objectives. Such requirements may be maintaining a certain spread, an average liquidity within a certain distance from mid-price where the mid-price is the arithmetic average of the highest bid and lowest ask quote.
Crypto market makers on decentralized exchanges
Decentralized exchanges, on the other hand, are typically quote-driven markets meaning there is no central order-book but a liquidity pool where traders match their swaps to a given quote provided by the protocol. Crypto market makers on decentralized exchanges are therefore not providing liquidity in the same way as they would on centralized limit order book markets. Crypto market making firms like Wintermute promise to do market making on decentralized exchanges.
Decentralized exchanges are offering AMMs (automated market makers) which are essentially deploying liquidity to two pools – one on the sell side, one on the buy side. A price curve defines at which levels liquidity is added and traders match their orders against that price curve with the given liquidity. Anyone can become a market maker here, where often when a price goes down a lot or up a lot, traders are stuck with either a large portion of the base asset respectively quote asset.
If you want to learn more about crypto market making make sure to check out this guide on crypto market making and find out exactly how it works.
Top 7 Crypto Market Makers
Now let’s cover 10 most reliable and professional crypto market makers out there.
Specifically reliability and trust is an absolute must when working with a crypto market maker.
- Autowhale – a trusted entity that specifically works with startups and supports projects outside from crypto market making with crypto exchange listings, algo trading software, consulting, tokenomics concepts, etc.
- GSR – a well-known market maker that can really move markets. Specifically on large markets.
- Keyrock is a European player in the space and definitely worth checking out when you are looking for a partner in the European area.
- Wintermute – A young market making startup.
- Hummingbot – A more retail oriented service that has developed a software that is targeting more the masses, however likely not intended for professional use.
- Bluesky offers an automated execution strategy for its clients and specifically mentions to work with exchanges to support their base markets.
- Algoz is a crypto trading solution company that develops a variety of service.
What risks are associated with Crypto Market Makers?
As you might have guessed crypto market making is a sensitive topic, therefore there are risks involved – already at the firsts stage of choosing the partner to go with.
When choosing a crypto market maker, it is vital to make sure the partner you are dealing with is legit. There are many scams out there that guarantee returns or promise certain developments. A serious market making firm would only provide the framework to clients that is capable of doing so but would never promise anything in that regard.
Additionally, it is important that incentives are aligned – i.E. paying a market maker is incentivizing them to act in your favor, it is always important to keep that in mind.
To sum up, working with a crypto market maker is essential for any project that has a native token or coin to support their product. The choice which partner to go with is an important one as many things on the token related side will be done together, strategies adjusted and future developments and campaign coordinated.