What Is Market Making?
This is where companies or individuals quote a buy and sell price in a financial commodity expecting to make a profit out of it. Market making involves purchase and sale of stock continuously on a price quoted to the public mostly done through a stock exchange. Crypto market making is a great revolution in business moving out of the old boring markets such as equities and fixed income. Crypto marketing is dependent largely on trading. Market makers could be firms or individuals engaging in actively quoting two-sided markets in security. They provide bids and offers in a security exchange market, called ask with the market size of each. In some other cases, market makers may provide trading transactions for their accounts which are called principal trades in the crypto market. Making market making is indispensable in the crypto industry sector
What Market Makers Do
Well, market makers who are also called liquidity providers play a chief role in the crypto industry and asses marketing. They simultaneously quote prices were in forms of bids and ask (called sell) for assets that are in exchange. How do they achieve this? Well, they quote prices at which they stand on ready to purchases and dispense in the form of sales assets.
In a nutshell, market makers in the crypto industry help to actively engage and facilitate the discovery of prices and liquid trading by other participants in the exchange market. Besides quoting prices on different trading avenues and doing conjunction between market sellers and buyers, market makers play an integral role in the increasing market efficiency.
They also serve to protect small firms and individuals in the exchange market from filling the market. This usually happens in security markets such as equities. Market makers act as barriers. They do so by engaging in competitive barriers and thus prevent small participants from acting as market makers. Market makers manage these competitions between firms and individuals doing transactions in these firms by bringing amicable price quotations from where firms and individuals can trade their liquid assets. It is noteworthy that crypto market-making firms generate profits from these transactions as they help link up traders and calm competitions. They also can be very useful for startups.
Market Making In Crypto Market Markets
Digital assets and market-making lower the barriers to entry coming from the general public. This usually occurs in the traditional sector of financial markets. Ideally, individual traders will have direct access to the market and to deal with transactions that involve digital asset exchanges in the market. This is critical to enabling them to avail price quotes and organize trade-in programs. They achieve this by using APIs chiefly as professional firms. Furthermore, the digital market avails free market data to individuals and firms engaging in the transactions and assets exchange. Everybody knows about Blockchain and Cryptocurrency nowadays.
It should be noted that not all exchanges offer co-location and some other key elements that play a role in offering competitive advantages to well-established players in the crypto industry. Some, however, provide free volume-based rebates. These usually favor professional trading firms in the crypto market and the exchange market. Usually, servers hosting the digital asset exchange are kept in a secret location. Digital asset exchange is stiffly competitive. It is often jammed with very many active, worldly accessible venues and exchangers introducing anti-competitive features risk which can potentially lose business from small firms and individual traders.
A fact remains; there are relatively few market makers in the crypto industry when compared to the proliferation of digital assets and exchanges. This has led to an intense concentration of liquidity. It is contradicting concerning the fact that market markers in the crypto industry are playing a crucial role in lowering competitive barriers in the market and crypto making. On high demand are the market makers dealing with digital assets as indicated by the immense compensation they receive from those issuing tokens and those making exchanges in the crypto market-making industry.
It is usually expensive for takers as far as exchange chargers are concerned. These are traders filling market price quotes in an exchange firm or industry. However, they experience low and sometimes no fees for makers in the market. Some market makers also enjoy rebates from certain exchanges. This is useful in creating incentives in the market making industry and keep transactions and investments growing and active.
To bar market makers from entry to market-making for digital assets, technical barriers are put in place. Digital asset prices are highly volatile and can keep on escalating or dropping down. Besides, trading in these assets is a 24/7 trading endeavor. This prompt market makers to put in place automated and algorithm designed approaches to keep them afloat in the sea of stiff competition. In turn, the market-making algorithm approaches handle cases such as stale data, trade execution lag, and API downtime and errors that might pop out in the event. There is always the need for substantially specialized engineering resources and knowledge to put down robust, engaging and highly reliable market-making algorithms. The same should be appealing in the crypto market-making firms.
Why You Need Crypto Market Makers
Well, crypto market makers help make benefits out of exchanges and projects on tokes in an exchange market. Bitcoin and Blockchain knows eveybody, but not crypto market makers. Their chief role is making it possible to do liquid trading where buyers and sellers are conjoined to transact readily in buying and selling assets at reasonable prices while minimizing the costs of doing transactions. In a nutshell, market makers help in maintaining amicable, efficient and healthy transactions amid stiffly competitive bids and ask spreads in the exchange market. Startups can benefit from these advisors. Through convenient and healthy order books they help to maintain the stability of token prices in the exchange market while equally managing price volatility.
Individuals and firms pay market makers to ensure and monitor peaceful, amicable and efficient double-sided quotes in an exchange market. In short, the market maker naturally permits funneling subsidies tailored at the most efficient forecasters in the market. Traders transacting in naïve tokens are dissuaded from getting the tokens since they risk material friction costs that come with such transactions and also the fear of unknown and uncertain out of position trade.
Most token projects in the finance sector and especially the ones in big exchanges listings and those budding in the industry improve the liquidity of their tokes by choosing professional market makers. Established exchanges, on the other hand, helps to put incentives in the market by providing cheap trading fees. Some choose to offer rebates. It depends on the firms and individuals doing the transactions in the crypto market exchange firms.
How to Measure the Performance of the Crypto Exchange Market Maker
The word is full of token projects and exchange market makers in the crypto industry. It can be hard to distinguish an outstanding and high performing market marker. The trick usually lies on the trading volumes and price targets.
Slippage is a key indicator of the best performing market marker. It has proven to be a more robust and productive indicator or a firm’s liquidity as compared to trade volume which is subject to manipulation and fabrication by some unethical firms. Perhaps we should start by defining the term slippage for better understanding. Well, slippage in simple terms is the difference between mid-market price and price at which trade is executed for that particular asset. This difference normally is calculated because the real trade execution largely depends on the depth and order book and it required in the number of orders filling the trade order size.
The smaller the slippage in the trade market exchanges the better its liquidity. This criterion of evaluating the performance of the market-making firms also helps in avoiding their attempts to overlook the performance to the clients and firms and prevent them from putting their profit interest as priorities and compromising the quality of services they offer to firms and individuals transacting through them. Some crypto market makers may set wide bid/ask spread leading to higher slippage and low volume in a bid to reap more profits from trading. This unethical behavior compromises the services to clients whose liquidity should be maximized instead. This performance metric is key to curbing such uncalled for misconduct by some market makers.
One has to be careful evaluating market makers basing on trading volumes. This is because this element can be easily manipulated in a bid to attract more individuals and firms doing business transactions through the market-making firm. Some individuals and firms may rule out this feature when evaluating the authenticity and the performance of the crypto market-making firm. It, however, counts after an examination into other important elements. Some market makers may be oriented in just creating a higher volume and in the event trade more during favorable market conditions but may not be capable of maintaining and ensuring consistent liquidity. This is a flaw to trade dynamics of the tokens and can even worsen the situation to the point of pulling down orders during times of high price volatility, a time when highly needed. Some cryptos market makers go to the unethical extend of even faking volumes of trades by wash creating and then filing their orders. This can be a setback to both established and budding firms wishing to transact in them it would be wise to avoid transacting in such firms reputed for their unethical trading h=behavior.
Also, note that some market makers may trade to influence levels f prices in the market. This is called market manipulation and may create unnecessary discomforts and compromise the quality of work in the market making industry and consequently loses to traders working through them.
Best Crypto Market Makers
Demand for liquidity is ever on the increase. This trend has seen the emergence of numerous crypto market makers. Here, we have analyzed the top four professional and highly reputed crypto market markers. It does not, however, limit firms seeking liquidity services from obtaining similar services from other crypto market-making companies and firms. This is chiefly a directory to some of the best firms
With approximately more than 80 issuers, Altonomy is ranked among the best 200 crypto market makers by capitalization standards. It also features the top global investment funds. Its headquarters is situated in Singapore
2. Alameda Research Group
This is a chiefly quantitative cryptocurrency trading firm doubling up as a liquidity provider. It manages approximately $100 million worth in digital assets and also trades in up to $1.5billion worth of liquids assets on thousands of products including altcoins, major coins, and their derivatives. It pro
3. Amber Group
This is an Asian based crypto market-making firm focusing chiefly in electronic market-making and systematic transactions in digital currencies. It covers sporting activities, swaps, options, futures, and a lot more derivatives. It provides liquidity services for miners and mining pools. It also deals with services such as exchanges, hedge funds, and token issuing. By estimation, it has transacted in more than $100 billion trade transactions on a wide variety of products and categories since its establishment.
4. Coin Flow
This a crypto market maker situated in Hong Kong. It provides services of designated market making, exchange making and other transactions dealing with exchange market making. It also deals with ICO Advisory services. Coin Flow is now offering crypto market-making services for the top 100 coins. This is a privately held type of market-making limited company. It specializes in fintech, blockchain, market-making ICOs, cryptocurrency, and liquidity.
Crypto market-making plays an integral role in liquidity services and exchange transactions everywhere in the world and many firms have found these services instrumental in their profit-making business transactions. With a genuine crypto making firm, firms and individuals have witnessed great progress in their transactions and some firms have grown to global standards and records through services of crypto market making. Serving to normalize prices and stiff competitions, crypto market making has ensured a peaceful trade transaction for firms and individuals dealing with liquid assets in a simplified and secure manner. However, it is important to put into consideration criteria for evaluating services offered by these crypto market makers because there are many of them where some of them may overlook services delivery to their clients and water down the quality of liquidity services they offer.