The strategies that they use range from hedging, trade-outs, fair-price calculations, and order-flow predictions. Crypto market makers hence create algorithms to fill buy orders when the sell orders are way ahead of organic buyers. The levels of spreads also depend on other conditions including the agreement between a market maker and exchange, volatility, and an overall liquidity scene of a particular trading pair. Crypto market-making algorithms guarantee that spreads are stabilized well enough in sync with their role to provide liquidity. Its algorithms should serve two purposes:Ī good crypto market maker has to generate robust algorithms that would keep spreads competitively low compared to other exchanges. This also requires due market research to gather information regarding any viable cryptos.Īpart from understanding the market a good crypto market maker also has to possess skills, and technical know-how to create algorithms that will effectively curb the bid-ask spread to keep it as low as possible to register early gains. They create algorithms only after taking into account the market variables because it gives the right sense of price fluctuations. A proficient crypto market maker is aware of the fluctuations and market volatility. A deep understanding of the prevalent market conditions will refine the crypto market-making strategies and its ability to spot prices. In the crypto space, it is equally important for crypto market makers to understand how the crypto market works. This was one of the most significant factors as it helped in setting the right buy/sell price for optimal transaction levels.
In traditional markets, market makers had to deal with a lot of quantitative finance. It is the role of the market maker to facilitate trading at lower costs, higher liquidity, and tighter spread which can be achieved with these functions. One of the most important parts of crypto trading is liquidity with a high transaction volume and tighter spreads. Market making is the practice of creating broader markets for traders to trade assets. But before we do that, let’s dig in a little to understand what the typical functionality of a crypto market maker is and understand how crypto market-making strategies work.įunctionalities of the crypto market maker In this edition, we bring to you one of the top crypto market-making providers, Kairon Labs.
While some of the fundamentals are still intact, digital assets present formidably unique market-making opportunities. Market making in the cryptocurrency industry is a newly packaged avatar compared to the traditional market makers.
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