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What is Crypto Market Making?

Crypto market making is a term used to describe the process of trading cryptocurrencies. It involves large institutions acting as market makers in order to maintain liquidity and generate profit in the financial markets. Market makers are responsible for maintaining an order book on the buy and sell sides, and can increase the liquidity in a low-trading market. These institutions use proprietary software to analyze the market and make informed decisions about price and trading volume. Generally, market makers commit to a constant bid-ask spread and a fixed quote size.

To become a market maker, you need to have a substantial trading capital to make profitable trades. While traditional markets often provide market makers with credit lines, making trades in crypto requires accumulating the trading capital yourself. Moreover, you have to assume the risk of investing 100% of your money. However, you can reduce the risk by limiting the trading volume to small transactions. This will enable you to make larger trades and earn more profits.

To qualify for listing on a cryptocurrency exchange, a project needs to partner with a market maker. Market makers ensure that order trading takes place. This enables crypto exchanges to reduce the friction and costs of transacting. These market makers also aim to maintain an order book that is healthy and stable, minimizing volatility and increasing the stability of a token’s price. By collaborating with a market maker, token issuers can focus on their project instead of worrying about the complexities of the financial markets.

A cryptocurrency market maker can also be accused of price manipulation, which is a crime in a regulated space. Besides erasing confidence in a traded asset, price manipulation can also result in severe losses for a good actor. Such actions can damage the reputation of the token and lead to expulsion from high-tier exchanges. This can also have devastating consequences for the company’s relationships with investors. So, it’s important to find a reliable market maker before entering into a deal.

Many firms are making their way into the crypto market. Virtu Financial, a multi-billion dollar trading company, announced its entry into crypto market making during its second-quarter earnings. The company’s crypto market making grew by nearly double in size, compared to the first-quarter. Among the top crypto market makers in the world are GSR, Kraken, and Kairon Labs, based in Belgium. This lucrative industry is growing quickly, so finding a good job is crucial.

Many companies that focus on the crypto market make hire from electronic trading firms or systematic hedge funds. For example, Enigma Securities and Wintermute Trading have recently hired Adam Roberts and Roy Tse from GAM systematic. While many recruiters are flocking to the crypto space, most firms require a minimum of three years of validated track records. And because the market is still young, there is a high demand for experienced traders. If you are interested in becoming a crypto market maker, there’s no better time than now.