The role of a crypto market maker is vital for cryptocurrency exchanges, as they provide better liquidity, full order books, and more stable pricing. Market makers also help exchanges improve the quality of their trading infrastructure and make them more attractive to users. To do this, they create order books with deep liquidity, tight spreads, and stable pricing. They also optimise their exchanges to accommodate different sizes of traders. Ultimately, this is the best way to ensure a steady flow of funds for cryptocurrency exchanges.
The role of a market maker in the crypto space is similar to that in traditional financial markets, but the industry is much younger, resulting in a highly fragmented market maker landscape. Regardless of the type of crypto asset, a market maker’s role is to increase the liquidity of assets, helping to make cryptocurrencies more accessible to the general public. This is done by facilitating trading and increasing the overall efficiency of the token ecosystem.
As the world’s largest and oldest crypto market maker, GSR is deeply rooted in the ecosystem. Its founder describes how the implosion of Terra has affected their strategy, and how it could create demand for new blockchains. GSR has also been around for almost three years, and has built up a diversified portfolio of crypto assets and derivatives. As a result, the role of a crypto market maker is both lucrative and challenging.
Another role of a market maker is to help new token projects become listed on exchanges or alternative markets, such as DEXs. These market makers build an extensive network of partners and token issuers, and they contribute to the growth of the DeFi ecosystem by bringing new token projects to the DEX. They also add liquidity to the liquidity pool and manage token inventory for their clients. These services are vital for enabling traders to take advantage of the influx of cryptocurrencies, which are increasingly becoming mainstream in the cryptospace.
Automated market makers employ liquidity pools to set prices for digital assets. These decentralized exchanges are similar to traditional stock, gold, and real estate exchanges, but they use a different approach to setting prices. In the traditional market structure, assets are traded in pairs; liquidity pools comprise two assets in a trading pair, and the price is determined by the relative percentage of each token in the pool. This eliminates the need for centralized authorities.
Crypto exchanges without a market maker would have to compete with hundreds of exchanges, including Coinbase. This means that they need a market maker to maintain competitive spreads and keep their markets attractive to traders. Market makers are also necessary for exchanges that want to differentiate themselves from their competitors, such as those that offer a diverse range of tokens. However, a market maker is not required to offer every token on an exchange. The presence of a market maker is vital to the success of this strategy.