A Guide to Market Making for Crypto Startups from a Crypto Market Making Firm
PlatinX Technology is one of the biggest crypto market makers that has been providing liquidity and market making solutions to crypto startups. This guide to market making will help the startups improve liquidity and understand everything about crypto market making.
Let us start by the basics about Market Making?
Market making is a process to improve liquidity of any asset. Liquidity means how easily a user can cash, sell or buy an asset. If you invest in crypto assets, then how easily you can sell those to get Fiat or trade crypto for another token tells us how liquid that asset is. Therefore, to give you a liquid market where there is easy flow of transactions, market makers are employed.
Market Makers quote buy and sell prices simultaneously thereby creating a market and increasing its liquidity. Market makers, also known as Liquidity Providers acts as both buyer and seller for an asset to create a market.
Why do we need Crypto Market Makers?
Crypto Market making is essential for every market be it traditional stock exchange or a crypto exchange. Here we will talk about Crypto Market Makers. Crypto assets are highly volatile and sometimes the bid-ask spread is too high. This deters investors from investing in crypto assets especially newly launched tokens. Liquidity Providers help create markets for these assets by reducing volatility and assisting with fair price discovery. They provide well-organized and cost-effective environment for traders to trade crypto assets.
Crypto markets are also available 24*7 which is the reason, market makers employ automated algorithmic approach (AMM) to provide services. They utilize APIs to provide market making. Some of the reasons as to why your crypto needs the help of the biggest crypto market makers are –
- Reduced Friction
- Token Growth
- Price Discovery
- Low Slippage
Advantages of crypto market making for Exchanges
The above are the advantages to tokens however exchanges benefit a lot from market makers too. Market makers enhance liquidity by increasing volume and attracting more investors. A highly liquid market and high volume ultimately attracts more users to any exchange. These matrices are the reason for new user subscriptions and token listings. Use of biggest crypto market makers of reputable brand would encourage price discovery, order fulfillment and a healthy market. Creating trust with a reputable market maker’s presence would increase investors confidence in the exchange too.
How to measure the performance of the biggest crypto market makers that you’ve picked?
You can easily measure the crypto market makers performance based on trading volume. Another robust indicator of enhanced liquidity is Slippage. While volumes can be manipulated easily and can be high in favorable market conditions. But what happens when the market maker pulls out or the conditions are not so favorable?
Slippage is more accurate measuring tool. Slippage is difference between the mid-market price of an asset and the buy or sell price. When huge orders come in, illiquid assets show high price volatility. Therefore, the smaller the slippage, the better is the liquidity enhancement done by crypto market makers. Slippage also helps in ensuing that the market makers working on enhancing liquidity rather making profit for themselves from trading.
Conclusion
Without the presence of one of the biggest crypto market makers, overall efficiency and market trust would be affected highly. Crypto markets need to operate efficiently while providing a seam-less and cost-effective platform for efficient & continuous trading. This is why exchanges and crypto tokens need the services of crypto market makers.
PlatinX Technology is one of the biggest crypto market makers that operates with programmatic execution and algorithms that integrate seamlessly with exchange APIs. With robust solutions and APIs we act efficiently and help provide consistent liquidity. We aim to provide a healthy crypto market to allow the development and adoption of the crypto ecosystem.