With the growing popularity of the crypto market and the development of global markets, the need for liquid sources of funds that support the stability of the trading processes of buying and selling investment instruments has increased manifold.
Consequently, the popularity of crypto liquidity providers has increased, offering a wide range of services related to solutions that ensure even liquidity distribution between markets.
This article is a quick guide to the world of crypto liquidity, explaining who crypto liquidity providers are and what benefits they have for the financial markets. At the end is a list of the 10 best crypto liquidity providers in 2024, which are recommended to look out for as part of a partnership.
What is a Crypto Liquidity Provider?
Crypto liquidity providers (LPs) maintain trading portfolios of cryptocurrency assets to facilitate the execution of client orders. Their primary objective is to aid in resolving the liquidity issues faced by cryptocurrency exchanges. If an exchange cannot provide sufficient liquidity, it may experience a liquidity crisis.
The liquidity provision process involves the injection of assets into the market, ensuring traders can buy or sell assets without experiencing significant price slippage. Liquidity providers can be individuals, institutional investors, or specialised firms that allocate a portion of their assets to the exchange order book. So, the primary objective of liquidity provision is to facilitate market efficiency by reducing bid-ask spreads and enhancing price discovery.
LPs work closely with brokers and other market participants to ensure that trades are executed efficiently and on time, helping maintain market stability and mitigate risk.
By offering their services to the market, LPs play a vital role in the functioning of the cryptocurrency ecosystem, enabling market participants to access the liquidity they need to execute their trades confidently.
Benefits of Working with a Crypto LP for Crypto Brokers
It is impossible to overestimate the positive effect that crypto liquidity solutions have on the market, helping it survive even the most extreme conditions of asset price volatility. Among the track record of benefits that top-tier liquidity providers provide the brokers and exchanges are the following.
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Tightened Spreads
When brokers work with liquidity providers, they can provide their clients with tighter spreads. This is made possible due to the fact that liquidity in crypto providers links brokers to a vast network of liquidity sources, which includes large banks and financial institutions. By utilising these connections, brokers can gain access to the most favourable rates available.
If a customer intends to purchase currency, a smaller spread could result in paying a lower or higher price for each currency unit. This could draw in more customers as it effectively reduces the trading cost.
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Deepen Crypto Liquidity Pools
Larger tier 1 liquidity pools are accessible through liquidity providers. As a result, brokers can execute trades of greater magnitude without causing significant price movement, a phenomenon referred to as price slippage.
It is possible for a broker to assist a client in trading a significant amount of a particular currency without causing a significant change in the price. This benefit is crucial for maintaining a superior level of service and remaining competitive in the market.
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Greater Risk Management
Brokers are exposed to risks associated with the volatile nature of the market, particularly during periods of significant price movements. Brokers can manage these risks with the assistance of liquidity providers. Using such services reduces the risk of price gaps and market volatility by ensuring there is always a buyer or seller for any transaction.
In the event of a sudden downward price movement, brokers must have a contingency plan to minimise potential losses. This is particularly important as brokers may be unable to sell off a significant amount of devalued currency, which could have a substantial financial impact. Therefore, brokers should adopt measures to mitigate risks and protect their investments.
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Price Stability
Given the substantial amounts of money that are constantly in circulation, the absence of these providers could lead to wild price fluctuations. Therefore, the presence of liquidity providers remains a critical aspect of ensuring that the market remains stable and predictable, providing a conducive environment for businesses and investors to operate with the best cryptocurrency liquidity.
The active participation of traders in the market helps to maintain a consistent and uninterrupted flow of trades and prices. This, in turn, makes it easier for brokers and their clients to navigate the market in a more predictable and efficient manner, resulting in a more stable and reliable trading experience for all parties involved.
10 Best Crypto Liquidity Providers in 2024
Today, the cryptocurrency market is a giant cash-flow-generating machine that trades within a myriad of complex trading instruments. Crypto brokerage firms and exchanges operating in this market need a constant and stable cash flow, which crypto liquidity providers provide. Below is a list of top crypto liquidity providers to consider for cooperation in 2024.
1) B2Broker
B2Broker Group is a PoP firm and one of the top 10 cryptocurrency liquidity providers on the market, being the official provider of Forex, CFD, and crypto liquidity and technology for brokers, crypto exchanges, hedge funds and other institutional clients. Particular focus is on cryptocurrency liquidity for the needs of exchanges, brokerages, and startups.
This company provides a complete ecosystem for businesses. In addition to liquidity, B2Broker offers such products as White Label cTrader, turnkey exchange, B2Core back-office, B2BinPay cryptocurrency processing, B2Trader brokerage platform, and investment platforms with the ability to provide clients with PAMM/MAMM accounts and much more.
2) Interactive Brokers Crypto
IBKR Crypto is Interactive Brokers’ cutting-edge offering that allows users to trade cryptocurrencies at favourable rates. With commissions as low as 2% of the transaction value, users can trade and hold major digital assets such as Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
In addition, the platform offers the ability to hold US dollars in a cryptocurrency account, trade additional tokens provided by Paxos Trust Company, and conduct cryptocurrency trading around the clock.
All trading and storage of digital assets is controlled by Paxos Trust Company, providing a safe and secure trading environment. In addition, the Interactive Brokers platform offers a unified trading experience, allowing clients to invest in cryptocurrencies alongside other assets such as stocks, options, ETFs, and more.
3) Wintermute
In addition to creating liquid and efficient crypto trading markets, Wintermute specialises in algorithmic trading for digital assets. With a cumulative trading volume of $3006 billion as of March 2023, it is a cryptocurrency liquidity provider with partnerships with over 50 cryptocurrency markets, including Binance, Coinbase, Uniswap, and Bybit. Also, it has been backed by Lightspeed, Pantera, and Avon Ventures, three of the biggest technology VC firms in the world today.
Wintermute offers liquidity support to blockchain projects across CEX, DEX, and MM pools, providing trading activity analytics and insight and collaborating with off-exchange blocks. In addition to liquidity provision, Wintermute conducts testing and employs the client’s products, offers co-building and advisory services, and extends support for OTC and treasury management.
4) Leverate
Leverate’s activities provide for the use of unique investment technologies required for brokers and solutions for crypto liquidity. Leverate’s clients can use premium services, as well as innovative technologies that significantly reduce risks in the market. The broker offers universal business solutions (LXSuite), professional support, and the innovative Sirix platform.
When managing risks, the actual execution of the transaction is considered the main thing. Thanks to STP technology, working out a hedging strategy extremely accurately is possible. Leverate also offers social trading. It implies joint work of traders at the trading terminal. Such interaction allows one to be well-oriented in online trading and to calculate all trading decisions.
5) Gotbit
Gotbit is a crypto market maker that uses a unique methodology based on robust algorithms. It also has a vast trading desk with over 50 members and a proprietary client platform that provides clients with unique capabilities. Clients are assisted in generating profits through the use of high-demand solutions.
Established in 2017, this crypto market maker supports 64 CEXs and DEXs and has 248 active clients. It consists of two principles. Firstly, it uses the computational core, trading algorithms, and market-making bots to make market decisions. Additionally, it utilises both a macroeconomic and theoretical approach to all markets.
6) Vortex
Founded in 2023, Vortex is an algorithmic market maker and token adviser. The company was ranked as the best market maker in 2023 based on the retention rate of clients. Unlike many of its competitors, Vortex is a comprehensive token partner, offering assistance with listing, business development, marketing, and even fundraising.
Using highly advanced liquidity provision algorithms, the company maintains an efficient market around the clock in even the most volatile markets. Vortex adheres to a client-oriented approach whenever possible, ensuring the company’s trading team fulfils the client’s key price/profit targets. Vortex has a team of 30 and is present in London, Dublin, Turkey, and the United States, with plans to expand to Hong Kong in 2024.
7) Kairon Labs
Kairon Labs is a specialised market maker and advisory firm for digital assets and exchanges, providing liquidity for different markets, including crypto and Forex. Kairon provides institutional-level liquidity solutions and quantitative trading strategies through proprietary trading software.
Kairon Labs was founded near the end of 2018 and was officially established as a dedicated crypto-native algorithmic trading service by 2019. The company leverages its extensive network of exchanges, investors, and service providers to offer world-class liquidity services to digital asset issuers.
8) Alphatheta
Alphatheta specialises in developing tailored solutions to boost token marketability and enhance tokenomic profile stability in the crypto market. Its services cater to various entities such as exchanges, listed platforms, and initial token offerings. Its ability to use deployable bots that simultaneously execute trading strategies across various crypto exchanges distinguishes it from other trading platforms.
Alphatheta also provides improved bid-ask spreads, which help investors determine the best time to invest and make better investment choices. In addition to being a crypto market maker, Alphatheta also provides other digital asset services, such as portfolio management, trading strategies, and asset custody and management.
9) Bluesky Capital
Bluesky Capital is a company that specialises in market-making and quantitative investment management within the cryptocurrency industry. Its services include providing liquidity to token projects and investors and offering custom investment and hedging solutions that support its crypto asset management offerings. The company’s quantitative investment products are designed to deliver superior risk-adjusted returns, underpinned by a proprietary research process that analyses historical data to identify alpha signals.
10) GSR Markets
GSR leverages its decade-long experience in the crypto market to offer liquidity to entrepreneurs and crypto exchanges alike, regardless of market conditions. Kraken, Coinbase, the Chamber of Digital Commerce, and Gemini are some trading partners and networks with which GSR collaborates. GSR’s expertise encompasses programmatic execution, liquidity provision, and risk management strategy.
Conclusion
Liquidity is probably the only element, the deficiency of which can damage the smooth and efficient trading process in any kind of market. Therefore, cooperation with the best crypto liquidity providers is an important component in interacting with the crypto market, which is developing at a rapid pace.
