What & Who: The Top 10 Crypto Market Makers in 2024
Everyone thinks crypto market makers are evil but what and who they are actually? We will discuss the what, how and why crypto market makers exist.
In the high-stakes world of cryptocurrency, market makers are the unsung heroes keeping the digital wheels of commerce spinning.
They're the backbone that ensures trades can happen without a hitch, providing the much-needed liquidity in a market known for its heart-stopping volatility.
But what exactly does a crypto market maker do, and why are they so vital to the health of the crypto ecosystem?
They're not just traders; they're the architects of market stability, creating opportunities for investors and maintaining the flow of assets. Dive into the intricate dance of crypto market making and discover how these pivotal players shape your trading experience.
We will also discuss about the top 10 crypto market makers in more details below, but, if you just want to know who are the top 10, here they are:
- GSR Markets
- Kairon Labs
- Bluesky Capital
- Jump Trading
- Archeron Trading
- Jane Street
What is a Crypto Market Maker?
A crypto market maker is an entity that ensures liquidity in financial markets by being ready to buy and sell assets at any time. They are akin to facilitators, balancing the supply and demand by posting bid and ask prices that are readily available for other market participants.
This continuous availability of prices helps to create a more seamless trading experience, reducing the time it takes for orders to be filled and enhancing the overall efficiency of the market.
With crypto being such a volatile asset, a crypto market maker provide stability in an inherently volatile environment.
Why do Crypto Market Makers Exist?
Without their presence, the liquidity of digital assets could be significantly lower, leading to larger spreads and more extreme price fluctuations.
By setting the bid and ask prices close to the current market value, market makers enable traders to execute transactions without significant delays, which is essential in a market that operates 24/7.
How Do Crypto Market Maker Make Money?
The operations of crypto market makers are driven by a non-speculative business model, where profits come from the spread rather than betting on long-term price movements. These spreads represent the difference between the price at which a market maker is willing to buy a cryptocurrency (bid) and the price at which they are willing to sell (ask).
Market makers do not rely on price changes to make a profit, as traditional traders do, but on the multitude of transactions that capitalize on the ever-present, small differences between buying and selling prices.
Market makers in the crypto industry frequently work with exchanges to provide liquidity, which may involve fee arrangements.
They use their own capital to engage in trades, and their ability to manage large volumes of assets positions them as key players in maintaining market fluidity. Efficient market making in the crypto space is especially crucial for assets with lower trading volumes, as these altcoins may be more susceptible to significant price changes without the mediating presence of an active market maker.
Given the intricate nature of their role and the potential for conflicts when multiple market makers are involved, it's paramount that clear agreements are set.
These agreements delineate each market maker's responsibilities and the ways they are incentivized, ensuring a harmonious operational environment that benefits the market ecosystem at large.
The Top 10 Crypto Market Makers in 2023 & 2024
#1: GSR Markets
GSR Markets, with ten years of expertise in crypto markets, operates as a market maker and investor. They offer tailored services like OTC Trading, Derivatives, and Market Making, catering to various sectors in the digital asset ecosystem, including token issuers and institutional investors.
Additionally, GSR has received In-Principle Approval for a Major Payment Institution license from the Monetary Authority of Singapore, enhancing their service to the cryptocurrency community, and actively invests in over 100 companies and protocols in the cryptocurrency and Web3 ecosystem.
- Expertise & Services: GSR provides liquidity to innovative entrepreneurs and crypto exchanges, offering liquidity provision, risk management strategies, and programmatic execution using proprietary trading technology.
- History & Partners: Over 10 years in the crypto market space, with partnerships including Kraken, Coinbase, Chamber of Digital Commerce, and Gemini.
- Customized liquidity solutions and strategies tailored for digital assets.
- Over 60 exchange integrations, offering market insights and daily reports.
- In-house software for granular performance measurement.
- Lack of an online dashboard for client access.
- No profit-sharing model with clients.
#2: Kairon Labs
Founded in late 2018, Kairon Labs established itself by 2019 as a crypto-native algorithmic trading service. It offers liquidity services to digital asset issuers through a broad network of exchanges and investors. The team, comprising entrepreneurs, engineers, traders, and business developers, focuses on market-making and financial advisory services.
Kairon Labs' technology integrates with various exchanges, enhancing trade reporting and performance tracking. Over four years, they've served 250+ clients across 80+ exchanges globally, maintaining a presence in North America, South America, Europe, Africa, Asia, and Australia.
- Specialization & Services: Focuses on utilities tokens and cryptos, leveraging traditional financial market strategies. Known for custom algorithmic strategies, deep analytics, arbitrage software, and services like exchange listings, IP licensing, and more.
- Experience & Partners: Experience handling major market events like the 2017 bull run and the 2018 crypto winter, with support from Flanders Investment & Trade, One Big Fund, and 3x Capital.
- Utilizes custom algorithmic trading with safety features.
- Tailored hedging programs and 100+ cryptocurrency exchange support.
- Direct communication channels and strategy tweaking.
- Does not provide inventory for clients.
#3: Bluesky Capital
Bluesky Capital, established in New York in 2014, operates as a leading global quantitative investment manager and crypto market maker, serving institutions and individuals worldwide. The firm is dedicated to delivering uncorrelated, superior risk-adjusted returns through sophisticated, actively managed quantitative investment products.
They also specialize in crypto asset management, offering customized managed accounts and tailored advice for crypto treasury management and hedging objectives
- Identity & Services: A market maker and quantitative investment manager, Bluesky Capital focuses on liquidity provision for token projects and crypto trading platforms, offering quantitative investment products backed by alpha signal analysis.
- Programs: Programs tailored for both token projects and crypto trading platforms, aimed at enhancing liquidity and mitigating price manipulation risks.
- Simple program implementation and round-the-clock liquidity provision.
- Utilizes proprietary trading technologies.
- Risks of losses associated with investment products.
Wintermute is a globally recognized algorithmic trading firm specializing in digital assets. They focus on creating liquid and efficient markets, operating both on centralized and decentralized trading platforms and off-exchange environments. The company is involved in providing liquidity on more than 50 exchanges and trading platforms, indicating a significant presence in the digital asset trading space.
Wintermute comprises two main entities: Wintermute Trading Ltd and Wintermute Asia Pte. Ltd. Both firms are involved in proprietary trading, dealing in various crypto assets and, specifically for Wintermute Asia Pte. Ltd, certain derivatives referencing cryptoassets.
- Specialty & Volume: Algorithmic trading firm for digital assets with extensive market presence and a cumulative trading volume of $300 billion as of March 2023.
- Backings & Services: Supported by top VC firms and offers liquidity for blockchain projects, CEX, DEX, and MM pools, along with OTC and treasury management.
- Investment in more than 75 projects since 2020.
- AI-driven algorithms for identifying market opportunities.
- Wide token trading spectrum and FCA cryptoasset firm registration.
- Does not trade in privacy coins.
Cumberland, a leader in both investing and technology with decades of experience, is dedicated to providing deep and dependable liquidity in cryptoassets. They cater to institutional investors, helping them to safely and efficiently capitalize on opportunities in the cryptoasset space. The firm offers a range of services, including institutional OTC liquidity in various cryptocurrencies, and is a leading provider for block trading and exchange-traded derivatives.
Additionally, Cumberland is prominent in bilateral crypto options and non-deliverable forwards, continuously expanding its trading capabilities.
- Subsidiary & Experience: A subsidiary of the diversified trading firm DRW, Cumberland has been operating since 2014, dealing in spot crypto liquidity, options, futures, and NDFs.
- Technology & Services: Employs price improvement technology and algorithmic strategies for optimal pricing, especially in larger trades.
- 24/7 access to relationship managers.
- The capacity to handle over 50 crypto assets with discreet large trade execution.
- Limited fiat currency transactions and variable trading fees.
#6: Jump Trading
Jump Trading, a firm deeply committed to world-class research, harnesses exceptional talent in Mathematics, Physics, and Computer Science to explore scientific frontiers and apply their findings to global financial markets.
Additionally, under the banner of Jump Crypto, they have been actively involved in the cryptocurrency sector for years, aiming to shape the future of crypto infrastructure and the industry as a whole.
- Research & Integration: This firm utilizes research to drive liquidity and execute enhanced strategies via Jump Crypto, conducting high-frequency trading and strategic implementation.
- Engagements with all major digital currency exchanges.
- Customized API integrations and smart order routing.
- Retreat from US crypto trading markets.
- Absence of an online user dashboard.
Algoz, an institutional-grade digital asset investment firm and technology development company, specializes in creating award-winning trading solutions. Their global clientele trades in both fiat and major cryptocurrencies, demonstrating Algoz's wide reach and expertise in the field.
The company offers institutional-grade trading solutions, working with market leaders to deliver top-notch asset management services. They also provide Quant Pro, an investment instrument designed for safer investing and improved trade transparency. Algoz's strategies focus on crypto derivative markets to generate Alpha, ensuring continuous trading and oversight to maintain high responsibility and service standards.
- Custom Solutions & Technology: Provides tailored trading solutions and market-making services, incorporating proprietary technology and specialized trader expertise.
- Trading Strategy: Implements market-neutral multi-strategy trading using algorithms developed by FinYX.
- Predictive capabilities for future pricing and integrated risk management.
- Access to various exchange APIs with automated trading tools.
- Limited trading platform integrations.
#8: Acheron Trading
Acheron Trading, focusing on strategic growth in the digital asset space, offers technology-driven solutions aimed at enhancing liquidity and transparency in digital assets. The company supports innovative technology developers in the digital asset ecosystem with a range of unique and diversified solutions.
Their services include Principal Market Making (PMM), which utilizes a symbiotic loan and call option model with live market metrics, and Designated Market Making (DMM), characterized by a white-glove contractual relationship. Additionally, they provide a Technology Provider service named Command Station, offering professional trading infrastructure, software licensing, and consulting
- Clients & Experience: Serves over 125 institutional clients, handling transactions on more than 50 exchanges, both decentralized and centralized.
- Services & Strategies: In addition to market making, Acheron offers strategy development, risk management, exchange advisory, and public blockchain infrastructure node operations.
- Expansive coverage for DEX, CEX, and public blockchains.
- Market making services are restricted in jurisdictions like Singapore and the US.
#9: Jane Street
Jane Street is a research-driven trading firm that combines curiosity and expertise to tackle complex problems in the financial markets. As a market maker and liquidity provider, they handle a diverse range of assets including equities, bonds, options, ETFs, commodities, and cryptocurrencies, aiming to enhance the efficiency and transparency of global financial markets.
Operating at the forefront of what's possible, Jane Street merges machine learning, distributed systems, programmable hardware, and statistics for global market trading. Their approach integrates quantitative and qualitative market understanding, supported by technology teams that manage billions in transactions and infrastructure teams ensuring seamless daily operations.
- Functionality & Trading: Jane Street is a research-driven trading firm, a crypto market maker, prided on providing liquidity to its clients. The firm is adept at buying and selling a multitude of digital assets, including ETFs, cryptocurrency, and options.
- Technology & Approach: By leveraging quantitative analysis, machine learning, and advanced programmable hardware, Jane Street operates across global markets to ensure consistent and reliable pricing for its clients.
- Services Offered: Besides market making, Jane Street offers other notable services such as liquidity management and pricing solutions.
- Trades a vast range of asset classes in over 200 venues across 45 countries.
- Employs machine learning and advanced technologies for trading strategies.
- Due to regulatory scrutiny in the US, the firm has reconsidered and scaled back some aspects of its global crypto operations.
Gotbit focuses on market making for Web3, with a commitment to crafting and executing tailored growth strategies for clients' tokens, primarily aimed at generating buy pressure in the market. This approach is rooted in their belief that market-making addresses the core challenge for Web3 founders: funding their teams and operations post-Token Generation Event (TGE). Their trading desk and AI-powered software aim to generate profits for customers, enabling the development of transformative crypto products.
Gotbit's Hedge Fund showcases impressive numbers: they manage assets worth 1.3 billion dollars, serve over 370 institutional clients, mostly consisting of Web3 startup founders, venture capital general partners and limited partners, and family offices. Their team comprises over 140 members, characterized by high intelligence and backgrounds in mathematics and technology.
- Uses algorithmic trading tools for market reassessment
- Provides platform-based solutions
- 24/7 uptime
- Supports DEX and CEX
- Expensive token listing fees
- Requires two small exchanges listed prior to listing request
#1: Providing Liquidity to the Market
Liquidity, crucial for a healthy cryptocurrency market, is maintained by market makers who ensure seamless trading without major price disruptions. They are vital across market conditions, providing continuous capital and maintaining full order books. This results in narrow bid-ask spreads and allows constant trade execution.
Their role becomes even more critical during retail trading downtrends, as they sustain market activity, essential for the growth of the crypto trading environment.
#2: Reducing Price Volatility
Market makers reduce volatility in cryptocurrency by setting bids and asks close to the market value, thus lessening extreme price fluctuations. Their presence adds predictability, absorbs trade shocks, and builds investor confidence.
By offering competitive spreads, they also counteract market manipulations like pump and dump schemes.
Their contribution to market security and stability fosters a mature, inviting environment for diverse investors. Their actions are especially key in trading pairs with lower popularity, ensuring continued viability and attractiveness of the cryptocurrency market.
Key Strategies Used by Market Makers
#1: Continuous Quote Market Making
Continuous quote market making sits at the heart of liquidity provision in the crypto sphere. In this approach, market makers place multiple buy and sell limit orders just outside the current market price. The aim is to capture the spread between the bid and ask prices, thereby generating profits from the small differences in each trade.
This strategy hinges on the assumption that prices will not move too drastically in either direction, allowing the market maker to frequently buy low and sell high.
Key to this strategy is the ability to adjust orders rapidly to reflect changing market conditions. This is where algorithmic trading platforms play a pivotal role.
By leveraging advanced algorithms, market makers can automatically update their quotes to remain competitive and effective in the fast-paced environment that is characteristic of digital asset exchanges.
#2: Statistical Arbitrage
Statistical arbitrage is a more complex strategy that involves identifying and exploiting price discrepancies across different cryptocurrency markets or pairs.
Market makers using this approach rely heavily on quantitative models that can parse through massive datasets to spot potential arbitrage opportunities.
The strength of statistical arbitrage lies in its risk-adjusted returns, as trades are typically placed in a way that hedges against market movements. These trades might involve multiple assets and, though the profits from any single transaction may be small, when scaled, they can contribute significantly to a market maker's overall profitability.
Custom-built software solutions and access to high-frequency trading tools are essential for this strategy to be successful.
#3: VWAP Trading
Volume Weighted Average Price (VWAP) Trading Strategy is a tactic used by market makers to execute trades in a way that minimizes a large order's impact on the market. By breaking up a substantial order into smaller chunks and trading these pieces at intervals over time, the market maker ensures that the order is filled close to the volume weighted average price rather than causing a spike or dip in the market.
Read Binance's Explanation of VWAP: https://academy.binance.com/en/articles/volume-weighted-average-price-vwap-explained
This method is particularly favoured for large trades by institutional clients who wish to avoid disrupting the market with a single large transaction. VWAP trading promotes greater market stability and offers an efficient way for big players to interact with digital assets without tipping the scale too significantly in either direction.
Algorithms again provide the necessary speed and precision to implement this sophisticated form of trade execution.
How Market Makers in Crypto Trading Benefits Everyone
Crypto trading has become increasingly sophisticated with the rise of digital assets. Market makers play a critical role in this dynamic environment, providing numerous benefits to the marketplace.
By understanding the impact of market makers, traders can appreciate the smoother experience and enhanced trading conditions that market making brings to the table.
#1: Tighter Bid-Ask Spreads
Narrow spreads are a significant benefit of market makers in crypto trading. When market makers are active, they continuously place buy and sell orders, which typically leads to tighter bid-ask spreads. Due to their role in the market, traders enjoy:
- Lower transaction costs because the cost to execute trades is reduced
- More attractive pricing for buying and selling cryptocurrencies
The presence of multiple market makers drives competition, which further helps to narrow the spread. They not only contribute to reducing trading costs but also enhance the appeal of a trading platform by providing better prices for market participants.
#2: Increased Market Efficiency
Market makers enhance trading efficiency by ensuring that liquidity is consistent. Even during periods of high volatility, they provide the necessary volume to execute trades promptly. This prompt trade execution promotes confidence among traders and attracts more participants, leading to a healthier market ecosystem where:
- Price stability is maintained
- Sudden price swings are mitigated
Their algorithmic tools ensure that buy and sell orders are placed across many price levels, which deepens liquidity and minimizes the impact on prices.
This increased liquidity is of great value to both retail traders and institutional investors, enabling them to execute large orders effectively.
#3: Enhanced Price Discovery
Efficient price discovery is a cornerstone of any financial market. Market makers in the cryptocurrency sector refine price discovery by setting buy and sell orders at various price points. This activity provides the market with:
- Access to accurate pricing that reflects the true value of a digital asset
- Reduced risk of price manipulation due to transparent order books
By maintaining fair price levels, market makers contribute to a balanced trading landscape where information is widely accessible, and trading decisions can be based on reliable data. As a result, both new entrants and seasoned investors can engage with digital assets more confidently.
As they continue to facilitate these key functions, market makers help in cementing the crypto markets' growth trajectory and in establishing further credibility amongst the trading community.
Challenges Faced by Market Makers in Crypto
#1: Dealing with Market Manipulation
Market makers often grapple with the threat of market manipulation, especially in the context of crypto trading where regulatory frameworks may lag behind technological advancements.
Low liquidity in certain tokens can allow bad actors to artificially inflate or deflate prices, which can challenge market makers' ability to maintain fair pricing.
Price manipulation undermines the credibility of markets, potentially affecting the confidence of investors. To combat this, market makers must employ sophisticated monitoring systems to identify and mitigate these actions in real time.
#2: Managing Risk
The volatility inherent in the cryptocurrency markets demands robust risk management strategies. Market makers need to balance their books while providing continuous liquidity to the market—no small feat considering the rapid fluctuations in digital asset prices.
A comprehensive risk management strategy includes mechanisms for hedging against drastic market moves and employing algorithms that can adjust to shifting market dynamics.
Market makers also need to consider regulatory risks as, for instance, major players have reduced presence due to uncertain regulatory environments.
#3: Coping with High-Frequency Trading
Another layer of complexity arises with high-frequency trading (HFT), where market makers engage in transactions within fractions of a second.
This intense pace necessitates an infrastructure capable of supporting split-second decision-making and immediate trade execution.
High-frequency traders rely on market makers to provide liquidity and timely execution of orders at fair market rates, challenging market makers to be consistently precise and available, regardless of market volatility.