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

So, you are launching a new blockchain-based project soon. Let’s see how the preparations are going:

  1. A unique idea – Check
  2. Extensive market research and roadmap creation – Check
  3. Well-written whitepaper – Check
  4. Crypto funds and vc angels waiting for you to bring them profit – Check
  5. Crypto exchanges willing to list your token – Check

Looks like everything is in order, it is high time to launch! But, wait a minute, how come that your token is getting little to no trading volume, large bid/ask spreads and unbalanced prices on different exchanges? – We have a strong feeling that maybe something is wrong with your venture’s liquidity.

Most ICOs are known for their lack of liquidity. What is not commonly recognized by the crypto community is that there are special institutions in charge of it. These institutions are called crypto market makers and liquidity providers and they are the ones who work behind the scenes of any token and crypto exchange to drive liquidity, reduce volatility and ensure its growth in the long term.

What Is a Crypto Market Maker?

A crypto market maker is usually represented by a firm whose role is to buy and sell assets from their own account throughout the trading day in order to add liquidity to financial markets. 

When providing liquidity to tokens, market makers make everything possible to prevent their collapse and attract more and more potential investors. Three things traders look for in ICOs are tight spreads, decent trading volume and orderbook depth. These metrics demonstrate that the token is under control and is more likely to stay in the market for a long time.

From a standpoint of cryptocurrency exchange, the need for a market maker is critical. No token chooses to list on exchanges with low trading activity and broad bid/ask spreads. Market makers help crypto trading platforms maintain fair asset prices, by making the market run continuously.

Why Do Startups Need a Market Maker?

Imagine a situation – you come to the market to buy a token and you see a trading volume of $1,000 per day. This specific token is listed on 5 other exchanges and its price across them differs significantly. The first and the second moments are instant red flags for investors. 

Crypto market makers create a healthy liquid environment for various projects to thrive on. Some people refer to them as market manipulators, but in reality, it is no more than a stereotype. Market makers make everybody on an equal footing.

One of the most common mistakes crypto startups make is hiring a traditional market maker. There are a lot of cases when people sign long-term contracts with traditional market makers and instead of liquidity they receive a severe money and community trust loss. Compared to crypto market makers, traditional ones only aim on keeping a tight spread without generating trading volumes.

When Should Projects Decide on a Market Maker?

Ideally, the tokenomics stage is the best time to sign up with a liquidity provider. The thing is, nowadays founders lean towards developing a product, its idea and value proposition more than caring how it would be alive in the future. When they finally come to market makers, it turns out that their vision doesn’t match the current market conditions and the strategy needs to be changed. 

That’s why consulting with a crypto market maker needs to be done in the project’s early development phase, when the team still has opportunities to change the tokenomics.

How to Choose a Good Market Maker?

As we’ve mentioned earlier, no tokenized project can exist without the constant support of a market maker. But how do you choose the best one?

  1. Experience – in such a young and volatile market as cryptocurrency, having a team with deep market knowledge and practical experience means getting more quality solutions and expertise needed to fuel your project. It is better to stick with a trusted company that knows exactly what it is doing.
  2. Achievable goals – unrealistic goals is something that we observe very often. The key to a successful market-making relationship between the market-maker and the client is setting realistic expectations from both sides. In order to coordinate market making efforts with founders’ objectives, both sides must streamline their communication.
  3. Transparent reporting – a transparent fee structure, clear communication, and thorough reporting is a must for every business partnership. Before signing a contract, you should clearly indicate what a market maker is accountable for and deliver your expectations regarding the project’s progress.
  4. 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.

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