Market makers and liquidity providers are essential players in the cryptocurrency market, for their activity is directly related to providing liquidity. In turn, liquidity is the lifeblood of financial markets. Liquidity is the ease at which assets are bought and sold, converted to fiat, and traded. Transactions with low-liquidity assets hang on trading platforms for hours or even days without an answer. Such assets are unattractive for investors and make no value for traders.
In this article, we will discuss the role of market makers in crypto and how they help make tokens attractive for investors.
The Essence of Crypto Market Making
Market makers are companies, banks, high-frequency traders, brokers, trading firms, and rarely individual traders, that cooperate with crypto platforms or projects to increase their liquidity. In their day-to-day activity, they usually rely on algorithms and tools that help them conduct thousands of deals. The essence lies in placing bid (buy) and ask (sell) orders to provide two-sided markets for a particular asset. A crypto market maker’s profit is a spread (the difference between buy and sell prices) one places in orders. Having completed thousands of trades daily, a market maker gains considerable profits from spreads collected.
Market makers help create a healthy trading environment for crypto assets, making them attractive and raising their trade volume. It’s especially valuable for the projects that prepare for listing token on exchange.
The Role of Cryptocurrency Market Making in Token Listing
New tokens and projects face many difficulties in getting listed on reputable exchanges. Such tokens are highly volatile and easy to manipulate. They lack demand and trade volume. All in all, they don’t look like attractive and reliable assets for investors. By hiring market makers, projects boost their tokens’ liquidity and move them toward adoption on trading exchanges.
Let’s see the benefits of a crypto market-making program for token listing:
- Boosted liquidity – it becomes easy to buy and sell tokens.
- Increased trading volume – more interest in trading, more investors attracted.
- Protection against manipulations – it becomes much more difficult to manipulate liquid assets, for this would require significant capital.
- Token adoption – people start discussions around the token and it becomes popular.
- Higher chance to be listed on top exchanges when a reputable market maker is cooperating and providing liquidity.
Final Word
Market makers are financial entities and high-frequency traders with solid experience in finance, an in-depth understanding of all the risks, and the ability to quickly adjust crypto market maker strategy to market changes. They are essential players in the crypto sector, making it attractive, efficient, and fair. Market-making services are used to boost new tokens’ liquidity and increase their chances of being listed on top trading platforms.
