Why Can No Crypto Startup Survive Without a Market Maker?


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Since blockchain technology was introduced, the traditional financial market has changed once and for all. People’s interest around cryptocurrency is rising every day, everyone strives to get into the market until it is too late. The following statement is likely to upset a lot of crypto newbies but the market is already overcrowded.

It is a positive thing for regular traders - they have plenty of investment opportunities to choose from. However, if you are looking at the crypto space from the business perspective, the current market state makes it hard for startups to survive - the benchmarks are high, the competitors are proficient in what they are doing, the investors are picky.

Dozens of brilliant crypto ideas pop out everyday, but just a few of them develop and grow. There are certain things successful startups share in common and having a crypto market maker is one of them.

Who Is a Market Maker and What’s Its Role?

Let’s start with understanding the concept of market making. Market making is an activity wherein a trader or a firm concurrently provides liquidity to both buyers and sellers in the financial market. Market makers provide liquidity, encourage a fair price discovery and make money by receiving the market spread (the difference between the bid and ask prices on the market). They provide a freedom for all market participants to close their deals without affecting token’s stability and nor experiencing price slippage.

Crypto market maker is an “invisible hand” that makes the market fair for all involved parties.

All successful token projects and exchanges are working with market makers, and the demand for them only grows as the crypto industry matures. ICO/IDO/IEO tokens can’t survive without a market maker. Having no liquidity partner is a big red flag for the majority of investors since the risks of losing all their deposits is very high.

Problems With Low Liquidity Tokens

It is common knowledge that all just listed tokens lack liquidity. All the investors see are big spreads, high volatility, low trading volume and large slippages - the whole project looks like a scam. Such a situation raises another issue - the risk of price manipulation. 

The price of a listed asset can get multiplied by 10X, 25X and even 100X, when compared to the price it was initially bought for, which gives token investors a chance to profit from selling it right after the project’s listing. These panic sell offs significantly hurt the project's image and are not easy to recover from. Sometimes, when the trading activity is low, it can take only one big order to crash the price of an illiquid token.

The tokens with low liquidity are put at risk of being delisted from an exchange.

How Does A Market Maker Ensure The Success Of Your Venture?

Managing Token’s Liquidity on CEX

Centralized crypto exchanges are very similar to the ones on the traditional market. Here is what the market maker takes care of when your project gets listed on CEX:

  • Orderbook management

Crypto market maker quotes bid and ask prices 24/7, ensuring the orders are filled without delay and slippage.

  • Buying power facilitation

Having a market maker automatically builds the confidence of investors and traders, in token’s value and stability in the long run which incentivizes both of them to contribute to the project.

  • Price and trade volume support

Market makers help crypto projects maintain a high level of liquidity, which inevitably results in keeping vital price levels, tight spreads and sustainable trading volume on one or multiple markets.

Managing Token’s Liquidity on DEX

Providing market making services on decentralized cryptocurrency exchanges is not a copy pasted version of what we described in the section above. Since DEXes are built completely differently they require a unique market making approach:

  • Liquidity pool setup & management

Crypto market maker is in charge of creating and managing the performance of liquidity pools making sure they lure more and more investors. The firm also provides technical support for all trading pairs to enable trade execution with minimum slippage.

  • Price control

Protecting the token from pumpers and dumpers is an essential goal for a market maker. 

  • Trading volume support

The robust technology and algorithms keep a stable trading activity to showcase the strength of the project.

BitQuant - A Market Maker You Were Looking For

BitQuant Capital ensures you make no mistakes when building a solid foundation for your token’s long-term success. 

So, it is high time we introduced ourselves! - We are value-driven market makers and one of the top-ranked crypto trading firms specializing in liquidity provisions for digital assets and exchanges, including CEXs and DEXs.

In business since 2019, we've experienced both successes and failures but learned from them. As for now we have successfully launched 12 tokens and have been providing 24/7 liquidity to them ever since.

We have built connectivity to dozens of crypto exchanges, including such liquid ones as Binance, Gate.io, KuCoin etc. 

Equipped with agile and highly scalable technology combined with years of expertise, we are more than ready to create a fair and liquid environment to accelerate the growth of your crypto startup.


Connect with BitQuant experts now!

 

Note: This post was published on behalf of clients. Publish0x does not vouch for the accuracy of the statements made in this post. The post should not be considered as an Publish0x endorsement of the products, services, or people mentioned.

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