Cryptocurrency trading continues to break new heights. Since the inception of the first exchanges such as Bitcoin Market and notorious Mt.Gox, the crypto trading sphere has undergone a tremendous transformation, resulting in roughly to 500 centralized and decentralized exchanges to exist today, according to Coinmarketcap. While the concept of trading could be clear enough, it could be unclear how good liquidity – the main criteria for traders – can be maintained. Here comes market making.
What is crypto market making?
Market making is a way to provide and maintain liquidity on centralized and decentralized cryptocurrency exchanges. The greater liquidity and the less bid-ask spread a certain market has, the more attractive it appears to traders. Simply said, market makers tend to make markets appealing to traders.
In most cases, market makers are professional companies that have a dedicated experience in trading, deep technical analysis skills, and apply tailor-made automated trading algorithms that maintain market depth and bid-ask spread. Market makers utilize API provided by the exchange platforms in order to perform numerous bid and ask orders placements per minute. By performing these actions, the market becomes attractive to end-users, both buyers and sellers, as the liquidity book becomes strong and mature.
Who are the biggest crypto market makers?
While there are plenty of cryptocurrency market making service providers that can be found on the market, it’s worth noticing a shortlist of market leaders.
Founded in 2017, Gotbit has significantly transformed from a kind of family office consisted of roughly 10 employees to a trading company with numerous directions. Namely, Gotbit has its own transparent trading platform where end-clients have 24/7 access, full reports and track performance, and full control over the market making treasury. Another Gotbit’s key merit is a diversity of unique CEX and DEX solutions, meaning that trading strategies used by the team are tailored-made, constantly optimized and reviewed by the internal development team. Gotbit provides daily reports and strategic calls to their clients, which makes the MM process look even more transparent and reliable.
Gotbit’s team has a strong background in the banking industry, as well as investments and consulting. The team now has over 100 members and continues to grow.
Gotbit’s primary approach that differentiates the company from other market making companies is the ability to act as an internal market making team, meaning that the firm will only benefit in the case their end client is profiting. In addition to liquidity management, Gotbit also takes full responsibility for a variety of tasks across crypto markets that tend to facilitate clients’ success.
Wintermute is an algorithmic market making service provider. It has its own OTC trading desk, NODE, on both spot and derivative markets. NODE can be accessed through the web interface and API, and serves as a professional tool for qualified investors with zero execution fees.
Wintermute often participates in early equity rounds, helping selected cryptocurrency startups to enter the market.
Wintermute has deep experience in DeFi, meaning that they cover DEX markets the same professional way as CEX ones. The company doesn’t have monthly fees, which makes its revenue model attractive to end-clients.
Founded back in 2013, GSR now has over 300 employees worldwide. The team consists of executives from traditional financial institutions, namely, Goldman Sachs, Citadel, J.P. Morgan, and Two Sigma.
The main GSR approach is following the pre-determined bid-ask spread and order book KPIs, meaning that the company guarantees the execution of the market’s characteristics set in the contract. Another GSR’s key point is improvised and intuitive risk management strategies, providing their clients with additional hedging options.
GSR also provides hedging opportunities for large miners, acting as a treasury management solution and providing them with yield enhancement strategies.
Amber is another market making service provider with a strong focus and influence on Asian market. Amber partners with token issuers in order to provide customized liquidity solutions that fulfill clients’ expectations. In addition to that, Amber acts both as a principal and designated market maker for exchanges, making markets more efficient, and, subsequently, more attractive.
Amber has its own digital asset platform built for individuals, WhaleFin. It was designed for customers of all kinds and serves as a digital assets gateway with margin trading and tight spreads. WhaleFin also has a debit card, thanks to the partnership with Mastercard and Unionpay which is accepted by over 50 million merchants around the world.
Jump Trading is a proprietary trading company founded back in 1999. Over the years, the company utilized and upgraded trading strategies and now focuses on high-frequency trading, resulting in the opening of a cryptocurrency branch in 2021 named Jump Crypto.
Why every project needs a top market maker
The main reason for a crypto project to operate with a designated market making firm is to attract current and potential traders to the market. Wide spreads, insufficient liquidity and unstable depth are the pillars that market makers are fighting with. It’s also worth noticing that stable volumes, low volatility and tight spreads are the keys to further exchange listings and other strategic opportunities, that’s why a wisely-picked market maker strengthens the project’s success.
To sum up, one should consider the following points when choosing the market making company to rely on:
- Spread tightness;
- KPIs and SLAs;
- List of supported exchange platforms;
- Ease and speed of access to reports;
- Security aspects;
- OTC trading desk;
- Team expertise and proven track record.