Are you an asset developer who would like help making your markets more attractive to users?
Crypto Liquidity Providers are often misunderstood and interpreted as some kind of 'market manipulators'. So first let’s clearly define what Market Making is: Market Making comes from traditional financial markets and describes an entity that helps keep markets of an asset healthy. Meaning, providing liquidity for buying and selling that asset. This is vital because as a buyer of a token you want to purchase an asset (close to) the last price. In technical terms a market makers job is described as keeping the spread in the order book of an asset as tight as possible. Here is where we can help. We can provide you the tools to achieve this for your markets. The aim is – besides making an immediate effect of being a more attractive market to trade on – to enable markets to grow organically by attracting more buyers and sellers who then themselves provide more liquidity.
Solving The Problem
When a trader views the chart of the token on the exchange and views blank candles in the 30m time span, 'the currency is dead' is the first thought that comes to mind. This condition is not good.
We grant liquidity to your trading pairs. Traders can buy and sell a token or coin instantly without missing a spread. Micro orders are executed to keep your candlesticks in good formation.
Spreads are the variation in the ask (sell) price and the bid (buy) price of the market. There are mainly two prices provided in a currency pair, the bid, and the ask price. You can see how it works in the chart below.
Closing this spread to less than 2% is a sign of a healthy market. In general, places like CoinGecko and CoinMarketCap only give good health rank scores to markets with spreads under 2%.
What We Do
Our market making system was developed in-house as a unique hybrid of Automated Market Making from liquidity pools applied for use with Spot Markets. This ensures that we can keep orders in your books at all times, no matter the current price. Since the software is integrated into our core systems, it is very fast and efficient.
How Does It Work
First, we setup a liquidity pool on our platform for each of the spot market pairs to provide market making on. The amount of liquidity provided into the pool directly reflects in the orderbook quantity amounts on the spot market. The greater the liquidity you provide in the pool, the greater the liquidity will be placed into the spot market. The more the better, but you can start small and add more liquidity to the pool at any time. In order to prevent removal of liquidity, we setup the initial liquidity in the pool. Once the pool is setup, we use mathematical equations to determine price points and quantities to place into the spot market orderbooks.
More information about how our liquidity pools work can be found here:Liquidity Pools
Prices for the spot markets are determined by a constant spread rate that is set at the time of creating the market making. Usually we try to keep the spread between buy and sell prices at 3% or lower, then the distance for the remaining orders can be anywhere from 2-4% away from the previous orders.
Quantities for each price level are determined using the formula P = sqrt(C/$). Where P is the primary asset total quantity in the pool, C is the constant product of the pool (constant product = Primary Asset Quantity * Secondary Asset Quantity), $ is the price. Using this formula we can determine for any price level how much of the Primary asset the liquidity pool can provide.
Due to the nature of how constant product liquidity pools work, there will always be some liquidity at every price level. Neither the Primary nor the Secondary asset quantities can ever reach zero.
We do not charge for the service. However, it is required that you deposit the funds necessary to create the liquidity pool for the market making. The amount needed entirely depends on the project. Contact us for more specifics and we will work with you to ensure you always have healthy orderbooks.
What is Market Making and how does it work in cryptocurrency?
Market Making is a process of providing liquidity to an asset's market to make it attractive to users. The market maker helps keep the spread in the order book of the asset as tight as possible by executing micro orders. Our market making system uses a unique hybrid of automated market making from liquidity pools applied for spot markets. We setup a liquidity pool for each of the spot market pairs and use mathematical equations to determine price points and quantities to place into the spot market orderbooks.
What are the benefits of Market Making for asset developers?
The main benefit of Market Making is to make the market more attractive to users by providing liquidity and keeping the spread in the order book tight. This can help markets grow organically by attracting more buyers and sellers who then provide more liquidity.
What is the spread in cryptocurrency trading and how does it affect the market?
Spread is the difference between the ask (sell) price and the bid (buy) price of the market. A tight spread, typically under 2%, is a sign of a healthy market and attracts more users to the market. Our market making system tries to keep the spread between buy and sell prices at 3% or lower.
How does the Market Making service work at XeggeX?
First, we set up a liquidity pool on our platform for each of the spot market pairs. The amount of liquidity provided into the pool directly reflects in the order book quantity amounts on the spot market. We use mathematical equations to determine price points and quantities to place into the spot market order books. We use a constant spread rate and constant product liquidity pool to ensure there is always some liquidity at every price level.
Is there a cost for using the Market Making service at Crypto Liquidity Providers?
There is no charge for the service, but it is required to deposit the funds necessary to create the liquidity pool for the market making. The amount needed depends on the project and can be discussed with us. Contact us for more information.