After endless months of value proposition modelling, tokenomics design, on-chain development and community engagement your team is ready to launch your ICO and list your token on exchanges. Your goal is to allow your investors, token holders and potential partners to trade your project’s tokens, fostering long term growth of your token ecosystem. However, you soon realise that the exchange listing process isn’t going according to your plans – low trading volume is occurring, and new investors are scared off by the wide bid/ask spread in your thin order book.
Token liquidity is crucial to attract new investors and traders, allowing them to deploy their algorithms in your token’s market and create new demand for your product. Without it, the price of your token will drop and your ICO will fail.
The problem is, token liquidity isn’t something that comes naturally – it must be created by professional market makers with the right expertise and tools. In this article we will look at how a new generation of professional market making for crypto assets can give your ICO a powerful boost and set the stage for its future success.
What is token market making?
Token Market Making is a service that involves buying and selling an asset on an exchange in order to profit from the difference between the buy and sell prices (the spread). Often, a professional market maker will make money by taking a percentage of the trades they facilitate – referred to as a’market taker’ fee. Supercharge your crypto project across multiple platforms and pairs. Whether your token is already listed or just going to get listed, partnering.
When a token is listed on an exchange, a large portion of the available liquidity comes from the market makers. The more buyers and sellers are in the order book, the lower the price impact of each individual trade. This is why a good market maker will make every effort to build a healthy order book with plenty of buy and sell orders at all times, enabling the best possible liquidity for their client’s tokens.
However, many traditional market makers struggle with the inherent complexities of this process and are incentivized to generate profits for themselves, which can mean working against their clients’ best interests. This is particularly prevalent in a highly volatile environment like the crypto market.
In such cases, a client’s token may be subject to wash trading or other manipulation techniques which can reduce their liquidity, negatively affect the price discovery process and ultimately harm the token’s reputation and value.
Token projects need a liquidity partner that is fully transparent about its operations and has a clear and consistent risk management policy. This is why a growing number of them choose MMaaS, a new type of market making model that gives full and instant control over their liquidity back to the token project – unlike the proprietary market maker model where tokens are loaned from a private reserve. This allows a project to monitor and manage its funds, trades, orders and everything else related to its market-making activities in real time.
