Have you ever noticed how easy it is for you to buy/sell a widely adopted cryptocurrency like USDT, for example? The price is in a line across all the exchanges.
The orders get closed in minutes, the order books are deep, spreads are tight and minimum slippage occurs when executing orders – a neon green flag ✅ for potential investors and traders. Most people take this for granted until they discover ICOs/IDOs/IEOs/STOs etc.
On the other hand, there are newly issued tokens that lack everything our example (USDT) has. These cryptocurrencies are not reliable and usually have little to no trading activity, which comes from:
- Little brand awareness – marketing strategy fails.
- No crypto market-making strategy or execution – even if a few people wish to trade your token, no one on the other side will be ready to execute an order.
We can conclude – even if your marketing team is trying its best and people are starting to purchase the token, without the constant support of a token market-making agency, crypto traders will face enormously large bid-ask spreads, not executed orders, and highly volatile price movements – these are the risks traders are not ready to take.
The thing holding so many innovative tokens back is called liquidity, the lack of it, to be specific.
Liquidity measures how quickly an asset can be bought or sold without significantly affecting its price. It is an essential factor for token holders as it allows them to convert their tokens into more valuable assets when needed quickly.
Liquidity issues are inevitable for every new token. Luckily for you, they can be prevented and solved with the help of token market-making experts!
Who Are Crypto Market Makers?
A cryptocurrency market maker is an entity or individual that provides liquidity to a token market by creating two-sided trades at the same or better prices than what is currently available in the market. It helps ensure that traders can enter and exit the market at any time without having to wait for another buyer or seller to show up.
Essentially, crypto market makers provide:
- Liquidity.
- Foster fair price discovery.
- Profit from the market spread (the difference between the bid and ask prices).
Unlike the stock market, which operates from 9:30 a.m. – 4:30 p.m. eastern standard time, the cryptocurrency market runs around the clock. To be able to trade crypto pairs on multiple markets all day and night, cryptocurrency market makers are required to have fully algorithmic and automated trading systems. Combined with a deep experience in crypto investments, technical analysis, and quantitative trading, using algorithmic software can establish healthy liquidity in a way humans on their own will never be able to.
There are 4 critical aspects investors look for in new tokens:
- Decent trading volume (on one or multiple markets)
- Tight spreads (on one or various markets)
- The deep order book (on one or numerous markets)
- Low price volatility (on one or multiple markets)
These measures show that the coin is under control and is here to stay.
Traditional vs Crypto Market Maker Software
One common mistake crypto owners make is hiring a traditional market maker with no crypto, web3, or blockchain background. Many token owners sign long-term contracts with traditional market makers and instead of liquidity, they get a significant monetary and community trust loss.
The main difference between traditional market making and market making in crypto is the technology used to place orders. Traditional market makers use established, slow-moving technology to place orders and are required to adhere to numerous regulations. On the other hand, crypto market-making firms use cutting-edge technology, such as automated trading software, to place orders quickly and with minimal regulatory oversight.
Finally, traditional market makers are generally restricted to trading assets listed on major exchanges. In contrast, crypto market makers are not limited to any particular assets and can trade any coin, regardless of its liquidity.
Meet BitQuant – The Master of Liquidity Provision & Market Making Crypto in the Digital World
BitQuant Capital is a world-class crypto market maker and liquidity provider that started operating in the industry before it even became mainstream. Our team of highly professional quant traders has broad experience in delivering cryptocurrency market-making solutions for tokens and exchanges, both centralized and decentralized.
Starting from preparing a “ground” for ambitious projects to thrive on, we later provide ongoing support during and after the launch. For example, since 2019, we have provided 24/7/365 liquidity to our clients and successfully assisted 12 token launches.
Together we share a passion for DeFi and Blockchain, which motivates us to develop more sophisticated algorithms to match the industry growth. As for now, we are connected to dozens of top crypto exchanges, including such liquid ones as Binance, Gate.io, KuCoin, etc.
We’ve been in the game for a few years now and know exactly how to address the needs of a crypto startup. Just book a call with us to receive a free consultation from one of BitQuant’s professionals. Or take a look at our website to fully explore our crypto market-making services and solutions.
