What Is Market Making in Crypto and Why Do Startups Need It?

Market Making in Crypto

So, you are going to launch a new blockchain-based project soon. Let’s take a look at what preliminary steps will be required.

  1. A unique or revolutionary idea – Check
  2. Deep market research with roadmap creation – Check
  3. Well-conceived whitepaper – Check
  4. Found venture capital funds that want to enter the project – Check
  5. A ready-made arrangement with a cryptocurrency exchange to list your token – Check

We have everything set up and it’s time to go live! But, wait a minute, how is it possible your token trades with almost no trading volume, has large bid/ask spreads, and unbalanced prices on different exchanges? – We have a strong suspicion that there may be something wrong with the liquidity of your venture.

A large number of high-profile ICOs are notorious for their lack of liquidity, and this will keep going on until the cryptocurrency community recognizes the fact that special institutions are responsible for this job. Such institutions are called crypto market making companies and liquidity providers. They are the ones who work behind the scenes of any exchange and are behind the digital assets to provide liquidity, reduce chaotic volatility, and ensure its growth over the long term.

What Is a Crypto Market Maker?

A crypto market maker is often a large player with significant capital, who participates in the market and helps provide liquidity. With its participation, any trader can buy or sell an asset at any point in time without a significant change in price.

Also, by providing liquidity to the token projects, MM facilitates the influx of interest from new investors and traders. Consequently with it, provides tighter spreads, a dynamic order flow in the order book and more active trading sessions. All these factors show investors that everything is working properly and it is worth staying on such an exchange for a long time.

Why Do Startups Need a Market Maker?

Imagine a scenario where you come to an exchange for a token you are interested in, where the daily trading volume does not exceed a few thousand dollars. The same token is traded on five other exchanges, but unfortunately at slightly different prices.

Will that give you confidence in buying such an asset and encourage further interest in the project?

Cryptomarketers create a healthy liquid environment for different projects to make them successful. Some people call them market manipulators, but this is really nothing more than a stereotype. Market makers keep everyone on an equal footing and do not allow play on price fluctuations.

One of the most common mistakes of crypto startups is hiring a traditional market maker. There are many well-known cases where the teams have signed long-term contracts with traditional market makers, and instead of liquidity, they get a serious loss of money and community trust. Compared to crypto market makers, traditional market makers are only focused on maintaining narrow spreads, but not generating trading volumes.

When the Project Should Contact a Market Maker?

The optimal scenario is to sign a contract with a liquidity provider at the tokenomics stage. The fact is that founders are often more focused on product development, functionality and value proposition than on how the product will perform in the future. When they finally come to market makers, it turns out that their vision is not aligned with current market conditions and the strategy urgently needs to be changed.

That’s why crypto-market maker consulting should be done at the earliest stages of the project development, when the team is still in a position to change the tokenomics.

How to Choose a Solid Market Maker?

As we’ve mentioned above, no one project can exist without the stable support of a market maker. But how do you choose the right MM?

Skills & Experience – in such a young and volatile market as cryptocurrency, getting the support of a team with the deep market knowledge and hands-on experience – is the key aspect for getting the better solutions and expertise you need for growing your project.

It is better to stick with trusted partners who actually know exactly what they are doing.

Achievable goals – unrealistic objectives are something we see very often in the crypto industry. The key to a successful market maker & client relationship is to establish realistic expectations on both sides. In order to coordinate market-making efforts with the goals of the founders, both parties must deeply understand each other’s goals and motivations.

Transparent reporting – a clear fee structure, accurate communication and thorough reporting are a prerequisite for any business partnership. Before signing a contract, you need to be clear about what the market maker is responsible for and make clear your expectations regarding the progress of the project.

Network of connected exchanges – crypto market makers with a vast network of partners are beneficial for any startup. They have the capabilities to help your project get listed and will provide ongoing support before, during and after the launch.

BitQuant Is Turning Market Making Industry Upside Down

Bitquant is a crypto market making team of professional algo traders with broad experience in market making, liquidity providing and liquidity management. What sets us apart from our rivals? – Well, we go far beyond what many people think about market makers.

If you are looking for a market maker that will blindly execute your tasks, you’ve come to the wrong place. We believe that a good liquidity provider should be deeply involved in the digital marketing strategy of the project to coordinate activities from both sides and make necessary corrections in time.

We perfectly know all the ins and outs of the crypto market and use the best market maker software to meet the needs of our clients. Our deep cryptocurrency trading knowledge combined with years of experience lets us craft the best market making solutions to meet the needs of our clients.

Since 2019, we have been providing 24/7/365 liquidity to our customers and have successfully launched 12 tokens.

We have built connectivity to dozens of crypto exchanges, including such liquid ones as Binance, Gate.io, KuCoin etc.

Accelerate the growth of your project by entrusting your liquidity needs to a top crypto market maker.

Book a call with us and we will find the best solution to satisfy your liquidity needs.

Last updated Dec 12, 2022

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