Our view on crypto market making

Introduction

There are many innovative crypto projects that have their own utility token or digital currency, yet most of them slowly fade out as a result of having illiquid markets. Project founders invest most of their resources into developing the technology, marketing, and managing the community.

The “gap” or spread between the bid and ask price of an asset is often times the reason of stagnant markets

Why your project should have a market maker:

New investors are attracted by markets with excellent liquidity
The tighter the spread (the difference between the bid and ask price) for your token, the cheaper it is to enter and exit positions.
A tighter spread will attract more sophisticated investors who are proficient in technical analysis (TA). TA is unreliable at best in a market with a large spread. Additionally, a sufficiently liquid market prevents large sell orders from having too much impact, resulting in more confidence for the investors.

A simple example on how to calculate the spread on an asset
Real market making is not about pumping and dumping

OK I get it! My project needs a market maker. But what does one do exactly?

It is wrong to think of market making as simple as running a trading bot. Yes, the custom built trading software is an integral part of the operations but it all starts with the insight and choice of strategy determined by the market maker. It requires a very specialized skill set to understand the order book, perform meaningful TA, consider the macro conditions etc before choosing a certain trading strategy for an altcoin.

It is pretty obvious that the first token is in need of a market maker
Example of healthy liquidity depth on Bitcoin

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