11 Oct, 23

The Significance of Market Makers & Our Unique Edge

market makers zerocap's edge
Zerocap

Zerocap

Cryptocurrencies are making waves in transforming the global financial system, but without market makers, the growth and stability of this asset class could be hindered. Market makers, be it firms or individuals, provide liquidity by buying and selling cryptocurrencies, bridging the gap between buyers and sellers. By facilitating trading activity, they reduce volatility, ensure constant price availability, and enhance the overall stability of the market.

But why does liquidity matter? Take this scenario: A crypto project seemingly has all the right ingredients for success – an innovative idea, robust technology,  and eager investors. However, post-launch, the market shows a wide bid-ask spread and the price plunges due to limited trading conditions. The momentum slows down, investors get frustrated and the once-promising project begins to stagnate. Such situations highlight the essence of liquidity. For a token to thrive, it needs more than just a strong foundation; it requires a two-way flowing market. That’s where market makers step in.

Zerocap’s Expertise and Edge

At Zerocap, our approach is deeply rooted in obsessively fine-tuning bid/ask spreads, even in the most challenging and illiquid markets. With 40+ exchange integrations, we provide deep liquidity across both centralised and decentralised platforms. Through a method-oriented strategy bolstered by proprietary technology, we deliver unparalleled service across various fronts:

Configurable Depth Boosting: We adeptly scale capital and layer orders, crafting a richer depth of market for our trading partners.

Proprietary Signals: We employ statistically-derived directional trading signals, enabling us to make informed and predictive decisions in the volatile crypto landscape.

Cross-Exchange Hedging: By maintaining positions across multiple exchanges simultaneously, we continually enhance depth and liquidity, ensuring clients get the best rates no matter the venue.

Price Anchoring: Our advanced systems minimise spreads between the mid-price on source exchanges and target exchanges, ensuring prices remain stable and reliable.

Volatility Management: Especially crucial during initial listings, we collaborate closely with projects to provide tailored services. Our aim is to ensure efficient price discovery, reducing uncertainties and stabilising the token’s entry into the market.

Performance Monitoring: We delve deep into user activity, understanding it at a granular level. Our clients gain access to high-quality trading data, insights, and analytics, arming them with information to make strategic decisions.

By meticulously analysing the trading ecosystem of our partners, we tailor strategies that align with their unique needs. Our robust liquidity solutions, coupled with our team’s vast trading experience with both nascent and established projects, ensure that we stand out in the market-making domain.

Challenges in Crypto Trading and the Role of Market Makers

The vast majority of tokens face numerous challenges with liquidity. For many, it becomes a chicken-and-egg situation: the spread is wide because of low volume, but volume remains low due to the wide spread. This conundrum highlights the indispensable role of market makers. By bridging this gap, market makers can jump-start the initial liquidity required, attracting more investors and facilitating further trading.

The benefits of engaging a professional market maker are manifold. 

With their support:

  • Exchanges are more inclined to list new tokens.
  • The token attracts a diverse and sophisticated range of investors.
  • Liquidity attracts more liquidity, setting the stage for organic growth.
  • Trading volumes and increased investor confidence can drive up the token price.

However, not all market makers are created equal. While good market makers focus on ensuring tight bid-ask spreads, there are those who resort to questionable practices like influencing token prices on spot pairs and earning funding rates on the corresponding perpetual pair. Such tactics may offer short-term gains for the market makers, but in the long run, they tarnish the reputation of the token and can lead to serious repercussions. 

To ensure the success and longevity of a token, liquidity is paramount. Market makers are the linchpin in ensuring this liquidity. As a leading market maker, Zerocap’s commitment lies in offering transparent, strategic, and efficient services that not only support the immediate trading needs of our partners but also foster long-term growth and stability.

About Zerocap

Zerocap provides digital asset liquidity and digital asset custodial services to forward-thinking investors and institutions globally. For frictionless access to digital assets with industry-leading security, contact our team at [email protected] or visit our website www.zerocap.com

FAQs

Why is the role of market makers crucial in the cryptocurrency market?

Market makers are essential in the cryptocurrency market as they provide liquidity by actively buying and selling cryptocurrencies. This bridges the gap between buyers and sellers, reduces volatility, ensures constant price availability, and enhances the overall stability of the market.

How does Zerocap differentiate itself in the market-making domain?

Zerocap distinguishes itself by obsessively fine-tuning bid/ask spreads, integrating with over 40 exchanges, and providing deep liquidity across both centralized and decentralized platforms. They employ proprietary trading signals, offer cross-exchange hedging, ensure price anchoring, and manage volatility, especially during initial listings.

What challenges do tokens face regarding liquidity?

Many tokens face challenges with liquidity, often resulting in a wide bid-ask spread due to low volume. This can hinder trading activity and deter potential investors. Market makers can help jump-start the initial liquidity required, attracting more investors and facilitating further trading.

What are the benefits of engaging a professional market maker?

Engaging a professional market maker can lead to exchanges being more inclined to list new tokens, attracting a diverse range of investors, setting the stage for organic growth, and potentially driving up the token price due to increased trading volumes and investor confidence.

What are the potential pitfalls of engaging with certain market makers?

Some market makers might resort to questionable practices, such as influencing token prices for short-term gains. While these tactics might benefit the market makers in the short run, they can harm the token’s reputation and lead to long-term negative repercussions.

DISCLAIMER

This material is issued by Zerocap Pty Ltd (Zerocap), a Corporate Authorised Representative (CAR: 001289130) of AFSL 340799. Material covering regulated financial products is issued to you on the basis that you qualify as a “Wholesale Investor” for the purposes of Sections 761GA and 708(10) of the Corporations Act 2001 (Cth) (Sophisticated/Wholesale Client). This material is intended solely for the information of the particular person to whom it was provided by Zerocap and should not be relied upon by any other person. The information contained in this material is general in nature and does not constitute advice, take into account the financial objectives or situation of an investor; nor a recommendation to deal. Any recipients of this material acknowledge and agree that they must conduct and have conducted their own due diligence investigation and have not relied upon any representations of Zerocap, its officers, employees, representatives or associates. Zerocap has not independently verified the information contained in this material. Zerocap assumes no responsibility for updating any information, views or opinions contained in this material or for correcting any error or omission which may become apparent after the material has been issued. Zerocap does not give any warranty as to the accuracy, reliability or completeness of advice or information which is contained in this material. Except insofar as liability under any statute cannot be excluded, Zerocap and its officers, employees, representatives or associates do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this material or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this material or any other person. This is a private communication and was not intended for public circulation or publication or for the use of any third party. This material must not be distributed or released in the United States. It may only be provided to persons who are outside the United States and are not acting for the account or benefit of, “US Persons” in connection with transactions that would be “offshore transactions” (as such terms are defined in Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”)). This material does not, and is not intended to, constitute an offer or invitation in the United States, or in any other place or jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or invitation. If you are not the intended recipient of this material, please notify Zerocap immediately and destroy all copies of this material, whether held in electronic or printed form or otherwise.
 Disclosure of Interest: Zerocap, its officers, employees, representatives and associates within the meaning of Chapter 7 of the Corporations Act may receive commissions and management fees from transactions involving securities referred to in this material (which its representatives may directly share) and may from time to time hold interests in the assets referred to in this material.  Investors should consider this material as only a single factor in making their investment decision.

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