Cryptocurrency Market Making: Why Is It So Important For Token Listing?

Crypto markets are developing at a rapid pace. Institutional adoption of crypto spurred the industry growth and the emergence of new financial products and projects based on blockchain. However, many young projects face difficulties connected with liquidity. Young and illiquid tokens are highly volatile, their trading volume is extremely low, and they are often used by bad actors for market manipulations. Not even mentioning the chances to be listed on top exchanges.

In this article, we will discuss how market makers contribute to efficient token listing.

The Importance of Market Makers in Crypto Listing

Crypto projects hire market makers to increase liquidity for their tokens. A crypto market maker is a specialized company, a financial entity, a bank, or a high-frequency trader that pours sufficient trade volume into the crypto market. What specifically they do is continuously place bid (buy) and ask (sell) prices for an asset on a trading platform. By doing this, they ensure they are ready to fulfill an arising trader’s order at any time. Therefore, they ensure a sufficient liquidity level, a balance of supply and demand, and maintain a fair price on the token. 

Many young projects face challenges with listing tokens. For example, lack of liquidity, low trading volume, price manipulations, etc. To solve these issues, projects hire market makers. Crypto market-making services boost token liquidity, resulting in:

1. Increasing liquidity helps investors buy or sell tokens easily.
2. Higher liquidity attracts more investors, grows trading volume, and reduces transaction costs.
3. Liquid tokens are much more difficult to manipulate.
4. The higher the liquidity the more people know about the token and trade it, thus the project’s chances of being listed on bigger exchanges are growing.
5. Partnership with a reputable market maker is a strong argument in favor of listing on top crypto exchanges.

How To Become a Market Maker?

It’s important to note that not just anyone can become a market maker in crypto (if we talk about centralized exchanges). Such platforms often require that a market-maker candidate owns a minimum net capital. Also, before partnering, a crypto company will ask candidates for compliance with regulations, licenses, etc. In addition, a market maker company must be experienced in finance, understand in-depth trading mechanisms, be able to adjust a crypto market maker strategy to changing market conditions, and manage risks. 

Final Word

Liquidity is the main factor determining a crypto project’s development. To ensure sufficient liquidity for new tokens, companies hire market makers – experienced traders that boost token liquidity, trade volume, and reputation, making it attractive and viable for the whole market and its participants.