Market Making for Crypto and DeFi

On an exchange, transactions are carried out as elsewhere: the seller and the buyer are involved. The seller places the goods online and waits for a potential customer to buy the goods. The transaction and delivery then take place. On a stock exchange, this happens partially. The market-making process guarantees the trader or investor to take over the counterparty, i.e. to act as seller or buyer. The market maker acts as an intermediary between the exchange and the trader. Moreover,  the market maker ought to be the one that sets the mutual position for all traders and investors. It ensures liquidity and thus the execution of clients’ orders.

What are the benefits of Market Making?

The benefits of the market making can be attractive for small accounts and, of course, for private investors.

Firstly, fixed spreads are usually guaranteed. This means that any extensions cannot be passed on to the client, even in uncertain times.

Secondly, market-making offers access to the constant price position during trading hours, allowing you to enter or exit whenever you think it’s necessary.

Moreover, market makers who are presented by CFD brokers can offer shares in futures contracts.

Disadvantages of the market maker concept are very few but still, you should be aware of them!  

1. Market making costs a little bit more than without it. Spreads can be much smaller, but unfortunately, private clients are often unable to trade directly on the exchange.
2. Market makers, for example, in the cryptocurrency market, tend to trick their clients and put them at a disadvantage. 

Generally speaking, market makers are key figures in increasing liquidity within the exchange as they actively bid and ask prices opposing your trade. As a result, market-making offers high-quality news feeds and charting software for free. Nevertheless, market makers create a clear conflict of interest for clients as they generate income by trading directly against you.

If you are interested in market making for exchange, we create our own strategies for the cryptocurrency market to increase volume and liquidity. Hodle team will be happy to increase traffic and interest in your business by showing good liquidity and volumes.