Liquidity is the lifeblood of any trading venue, be it a traditional exchange or a crypto one. Without it, both traders and investors would be frustrated, as they wouldn’t be able to make trades at a price that is close to the actual market value of an asset.
The driving force behind liquidity is market makers, who are professional traders that actively quote two-sided markets in a given asset, providing buyers and sellers with a list of bids and asks and their respective sizes. Market making is a risky business, but it’s also an extremely profitable one for those who can master the profession and gather the necessary resources.
A good example of a crypto market maker is CLS Global, whose technology allows the company to respond quickly to changes in the digital asset markets and execute trades within milliseconds. They do this by placing orders at multiple exchanges and OTC desks simultaneously. As a result, their clients can get their orders filled at the best possible prices and with minimal fees.
The crypto world offers some unique opportunities for those who are willing to take the plunge and start their own market-making business. As the industry is largely unregulated, it’s possible to make a killing on small variations in pricing across different exchanges. If you do your research and find a niche, you can capitalize on this by buying assets from underpriced sources and selling them on overpriced ones, also known as arbitrage.
In the cryptocurrency world, market makers are professional traders that operate under a license, provide liquidity to a particular asset and earn on the spread between the buy-sell price. In order to maximize their profits, MMs must ensure that they are always in the position to fulfill any buy or sell orders that come their way. This is why they usually co-locate their servers with those of a crypto exchange they work with.
Another way that market makers maximize their profit is by ensuring price continuity on the market. This is done by maintaining a narrow bid-ask spread, which makes it easier for traders to transact and reduces the risk of illiquidity.
Crypto market making is a key part of the financial ecosystem, providing liquidity to exchanges and facilitating the trading of new assets. As such, they’re an important contributor to the stability of asset prices and should be treated with respect.
To succeed as a market maker in the cryptocurrency world, you need to have an impressive portfolio of trading capital and a robust understanding of the crypto markets. It’s also important to be able to meet the stringent requirements that vary from country to country, including extensive KYC checks and compliance with various national and international financial regulations. KYC-Chain is a leading provider of automated KYC and onboarding solutions to many of the most innovative market makers in both the traditional and crypto spheres. We help these providers streamline their KYC processes, enabling them to offer an even better service to their customers.