What Is Crypto Market Making, And Why Is It So Important?
Market making has been a cornerstone of the traditional finance (Trad-Fi) realm for decades; however, over the past few years, it has found an increasing role within the burgeoning cryptocurrency sector as well — especially as the industry’s valuation has extended into the multi-trillion dollar terrain.
Simply put, market-makers are entities designed to promote liquidity and facilitate efficient price discovery, ensuring that the crypto sector remains robust while remaining stable (i.e. low volatility). To elaborate, they stand ready to buy or sell assets at any given time, thereby maintaining a continuous flow of trading and ensuring that buyers and sellers can execute trades whenever they wish. By doing so, they play a crucial role in stabilizing market prices and aiding in efficient price discovery (i.e. the process of determining the fair price of an asset based on its supply and demand dynamics).
The crypto market’s lifeline
The profitability of market makers lies in the ‘bid-ask’ spread, which, in simple terms, is the difference between the price at which they buy an asset (bid) and the price at which they sell it (ask). It is this spread that compensates market makers for the service they provide and the risks they undertake.
Crypto platforms, particularly exchanges and certain token-based projects, leverage their services to bolster their ecosystems significantly. The continuous buy and sell orders provided by market makers augment liquidity, which is a critical aspect for their continued smooth operations. Moreover, this enhanced liquidity and the consequent reduced bid-ask spread lowers trading costs, making these platforms more competitive and enticing to traders.
Other positive offshoots of these entities include increased trading volumes and heightened activity, allowing platforms to enhance their ranking and visibility within the crypto community. Additionally, the favorable environment created by market makers aids in the successful launch and growth of new projects and tokens, helping draw more developers and innovators to the ecosystem in the process.
Lastly, the sophisticated trading systems and analytics employed by market makers can provide invaluable market information and data, allowing projects to refine their services and offer better insights to their users. Some platforms even engage their clients in community-centric liquidity provision programs, thus fostering a sense of shared affiliation and responsibility toward them.
A detailed look at the matter
In the midst of a rapidly evolving economic landscape, Auros has emerged as a leading market-making firm within the digital assets sphere, distinguished by its innovative approach to liquidity provision and sustainable growth. With a foundation built on algorithmic trading expertise, Auros takes a partnership-centric approach to its continued success, collaborating closely with early-stage projects so as to bolster their market presence and liquidity profiles.
One of the hallmarks of Auros' service suite is its unique KPI-based result model. Unlike conventional market makers, Auros aligns its success metrics with the goals of its partner projects, ensuring a mutually beneficial relationship that propels both parties towards their respective milestones.
With over 1.5 trillion in cumulative trading volume and integration with 60+ exchanges, the firm has positioned itself among the top echelons of global cryptocurrency volume contributors. Lastly, Auros’ partnerships, which extend to innovative crypto projects like Clearpool, Radix, Cega, and Qredo, highlight its influence beyond the realm of liquidity provision alone.
Looking ahead
As market makers continue to play an indispensable in ensuring liquidity, reducing price volatility, aiding fair price discovery mechanisms, and accommodating large institutional investors, firms like Auros seem to be well-positioned to experience significant growth in the near future.
In this regard, it bears mentioning that the project recently secured $17 million in a funding round led by Vivienne Court, with participation from notable investors like Bit Digital, Trovio, Epoch Capital, Primal Capital, and Optiver​. Therefore, as we head toward a future driven by decentralized finance (DeFi) based technologies, it will be interesting to see how the role of these market makers continues to evolve and grow.