In the crypto industry, market making is a new concept unlike on the conventional financial markets. Although the basics are almost the same, digital assets offer unique opportunities. In this article, we are going to find out about market makers and the difference between conventional market makers and their crypto counterparts.
What is Market Making?
In simple terms, this term refers to the practice of quoting both a buy and a sell price for a financial instrument, commodity or cryptocurrency, hoping to make a profit on the bid-ask spread.
Doing this generates more liquidity for traders so that they can engage in buying and selling activities easier and with less slippage. Typically, traders keep an eye on the markets and grab an opportunity to trade right away. This means they are taking the buy and sell orders market makers put up.
Marketing Making is Equal to Liquidity Building
Usually, market makers’ role is to boost liquidity by helping facilitate trading. For instance, if you place a sell order with a market maker for, say, 200 shares of Samsung, the market maker will complete the order right away. This is what the term “making a market” refers to.
The Difference Between the Crypto Market and the Traditional Market
In the conventional financial markets, brokerage services and banks usually offer these market making services. In contrast, crypto market making services are usually provided by highly specialized quantitative trading firms. One example of such firm is Kairon Labs, a Belgian based crypto market making firm. Below are the primary differences between the conventional and the crypto market making service providers:
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New Cryptocurrencies
Since the demand for crypto and digital assets keeps on increasing, the demand for legitimate market making is on the rise as well. Therefore, we need market makers that help keep spreads as tight as possible and infuse liquidity at the same time. If a cryptocurrency project features good liquidity, It will have an easier time winning over the confidence of investors and traders. As a result, it helps boost the trading volume and projects can get listed on different and bigger exchanges.
Below are some of the services crypto market makers they offer:
Long story short, this was the introduction to crypto market makers and their growing importance. If you want to know more, you can contact Kairon Labs for any crypto market making services you might be interested in.
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