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Cryptocurrency Market Making- An Overview


Daljit Singh

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January 24, 2024

Cryptocurrency Market Making- An Overview


Daljit Singh

linkedin profile


January 24, 2024

Table of Contents

Crypto marketing facilitates the sale, purchase, and exchange of digital assets in the cryptocurrency market by uniting buyers and sellers on a single platform. Liquidity plays a significant role in every market’s ability to succeed. A liquid token can be sold quickly and will find adequate buyers without experiencing a major price fluctuation. As a result, liquidity is essential to the cryptocurrency market.

A crypto market-making strategy is frequently employed to give digital assets the liquidity they need to draw traders and buyers to cryptocurrency exchanges and trading platforms. In a cryptocurrency market, the procedure begins with the highest bid and the lowest ask price for a digital asset. A “spread” is the amount that separates the highest offer from the lowest askor the lowest price that the seller has agreed upon. Large spreads are indicative of liquid markets. The absence of market makers will result in a decrease in market activity. They actively place orders to preserve liquidity, cut the spread, and make profits.

Crypto Market Maker

This aspect will answer the question, what is a market maker crypto? Exchanges have traditionally recruited market makers, who quote bid-ask asset prices all day to keep spreads below a maximum limit, retain orders for a minimum amount of time, and maintain minimum depth. To put it briefly, market makers ensure that the exchange remains competitive and draws in dealers.

Although the primary responsibility of the Crypto Market Maker is to maintain market liquidity, it is a challenging task given the extreme volatility of the cryptocurrency market. This then begs the question, what is a market maker crypto? Or better still, who can be a crypto market maker?

  • A profitable crypto market maker is someone or something that uses a cryptocurrency exchange to buy and sell to add depth and liquidity while making money from the difference between the bid and ask spreads.

  • Market makers should be wary of holding their digital assets as the security value could drop significantly after purchase and sale.

  • In cryptocurrency trading, market makers must possess extensive investment experience, technological know-how, and substantial financial resources.

  • Market makers could be individuals, banks, brokerage houses, trading firms, brokers, or institutional traders.

  • Specific cryptocurrency trading platforms also use market-making bots.

Several traders operate on the global stock and currency markets through cryptocurrency market making. One of the benefits of cryptocurrency trading is lower operational costs, as the liquidity taker just pays a percentage of the trading fee.

Why Should You Use A Crypto Market Maker?

You can use a Crypto market maker for any of the following reasons:

  1. Providing Liquidity

When traders actively participate, the market benefits from organic volume rather than unethical methods such as wash trading. Maintaining ethical financial conduct and fostering investor confidence depend heavily on this distinction. Market makers are essential to the optimization of liquidity since it has a direct effect on investor confidence and organic volume. 

Token issuers should prioritize organic volume growth over dishonest practices and recognize the significance of an active market for token acceptance. Collaborating with market makers enables tokens and their ecosystem to expand scalability, highlighting the importance of moral behavior in financial markets.

  1. Arbitrage

The activity of purchasing and selling assets in various marketplaces to profit from price disparities is known as arbitrage. This may cause tokens to become unstable and inconsistent, undermining investor confidence and making it difficult for issuers to uphold their reputation and worth. Cryptocurrency market making can reduce arbitrage by managing high trading volume, maintaining consistent liquidity, and quoting asset prices across various venues. 

Because of their capacity to handle huge orders, notable pricing differences and market inefficiencies are avoided between marketplaces.

  1. Work With Exchanges

Exchanges and market makers frequently work together to preserve liquidity and reduce the likelihood of arbitrage. Market makers benefit from fee rebates and other incentives, increasing trade volume and capital efficiency. Both sides gain from this partnership, which increases trading activity on the exchange and guarantees that customers can trade with the token issuer’s asset, raising organic volume. This link also increases confidence in listing assets for token issuers, allowing users to trade with them.

When Should You Use A Market Maker

An asset can be introduced with effective market making, which can also draw investors by increasing trading liquidity when needed. In addition to the requirement for price stability, the following other circumstances call for the services of an automated market maker crypto:

New Token Launch

When it comes to fostering investor confidence in new assets, market makers are essential. They guarantee that the asset has sufficient liquidity across exchanges to satisfy prospective demand, which is critical to its success. Additionally, low volatility is necessary since implementing a new asset with little liquidity can cause sharp price swings and heightened market sensitivity. Additionally, because investing in new assets is risky, investors need funds they can withdraw from easily. If something goes wrong, market makers must ensure the funds are protected and can be readily withdrawn.

Drawing in Institutional Players 

A specific amount of liquidity is needed for institutional traders to conduct large trades, which can make it expensive for investors to enter or exit the market for a given asset. This liquidity is necessary to prevent slippage and price swings. Dealing with a trustworthy market maker shows that a certain amount of liquidity draws in institutional investors and raises the market’s tolerance for these big deals. The effect of market makers on lowering the bid-ask spread is comparable to this. 

For a specific asset, they can frequently participate in OTC deals with the market maker, which can be advantageous for sizable operations. Working with market makers also lessens the possibility of dishonest players manipulating prices, strengthening the market’s resistance to fraud.

Crypto Market Making Bots

Crypto Market Making Bots

Market making in crypto services submit both ask and bid limit orders, contributing to liquidity. To maintain liquidity and help close the price difference, the service provider would simultaneously quote for both the buy and sell prices of a cryptocurrency asset.

An ideal automated market maker crypto software must have the following features.

  • Automation: The cryptocurrency market making bot should be automated to operate on controlled or decentralized exchanges.

  • Steady Spread: One can optimize a consistent spread to keep the market functioning well. More profit margins are guaranteed for market makers when the bot maintains a steady spread.

  • Liquidity maintenance: A proficient bot has to possess the capability of preserving liquidity. It may be controlled via configurable API endpoints or by hotlinking to well-known exchanges like Binance and Bitfinex.

  • Adaptive: It should be able to set up new trading strategies using modular and adjustable algorithms and scripts.

An ideal crypto market making software trading controls performance through online analytics and monitoring tools.

Custodial Vs Non-Custodial Wallets

The following factors should be considered when choosing between a custodial or non-custodial wallet.

Security: Since users have exclusive control over their private keys, non-custodial wallets are typically more secure than custodial wallets.

Usability: Since the user does not have to worry about the technical requirements of keeping their wallet, custodial wallets are typically easier to use than non-custodial wallets.

Control: While custodial wallets relinquish control to a third party, non-custodial wallets allow users total control over their crypto holdings.

Trust: Users of non-custodial wallets do not need faith in a third party to handle their cryptocurrency, whereas users of custodial wallets must.

Cost: While non-custodial wallets are frequently free to use, custodial wallets may have extra fees attached.

Why Use Debut Infotech As Your Crypto Markey Maker

As a cryptocurrency wallet development company, we differentiate ourselves from the competition by taking a comprehensive and scalability-focused approach. We have upgraded our infrastructure throughout time to offer different digital assets long-term liquidity. We emphasize building a solid foundation for long-term market expansion while maintaining resilience more than we do on swift expansion.

Keeping with our long-term attitude, we see ourselves as companions in our partners’ success and place a high value on transparency in our business dealings. We ensure our partners are actively involved in their liquidity and market goals through weekly insights and comprehensive reports, accompanied by customized crypto market maker strategy agreements that meet their financial needs. 

Our long-term commitment to working with us reflects our partners’ high level of satisfaction that we have always maintained since we have always been future-focused.


If cryptocurrency market makers are the foundation of cryptocurrency trading, then cryptocurrency market making software is essential to bringing liquidity with security, speed, and accuracy. The market-making software serves as a crucial driver in advancing cryptocurrency trading marketplaces, concurrently exploring novel avenues of innovation. This encompasses the proactive pursuit of pioneering solutions, with a specific focus on the crypto wallet development to expand the range of services and functionalities.

Debut Infotech can assist in the creation of software that creates cryptocurrency markets. We provide marketing-making software that is tailored to your company’s requirements. Speak with one of our subject matter experts to discuss your needs.

Frequently Asked Questions

Q. What is the cryptocurrency market making?

A. It’s the process of continuously offering buy and sell orders in exchange for a particular coin. The market maker gains from the bid-ask spread (the difference between the highest bid and lowest ask), which generates liquidity and makes it simpler for buyers and sellers to connect and complete trades.

Q. Why is liquidity necessary in crypto markets?

A. Prices in a liquid market don’t change dramatically in response to tiny orders since there are always enough buyers and sellers prepared to transact. Because of its stability, the market grows by drawing in additional merchants.

Q. How do crypto market makers earn profits?

A. By primarily using the bid-ask spread. They capture the difference in each transaction by buying slightly below their ask price and selling slightly over their bid price. Furthermore, some market makers charge exchanges for the liquidity they supply.

Q. Do all cryptocurrencies need market makers?

A. High trade volume coins that are well-established typically have adequate natural liquidity, negating the need for specialized market makers. However, market makers must frequently draw early trading activity and increase liquidity for less well-known or new coins.

Q. Are there any risks associated with cryptocurrency market making?

A. Yes, there are risks associated with it, including volatility in the market, sudden shifts in price, and possible manipulation of the order book. Losses might also result from complicated trading algorithms and technical malfunctions.


April 8, 2024

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