24 Oct, 23

Token Market Making: Advantages for Crypto Projects

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Have you ever wondered how cryptocurrency prices remain relatively stable despite the infamous volatility of the crypto market? Enter the world of token market making. It’s an essential tool for crypto token projects, ensuring they don’t sink into the abyss of market irrelevance.

What is Market Making?

Market making isn’t new. It’s a financial strategy that involves continuously buying and selling securities or tokens to provide liquidity to the market. Historically, stock exchanges used market makers to ensure that trades could happen anytime.

Diving Deep: Token Market Making

Cryptocurrencies, being the rebellious teens of the finance world, need a special kind of market making. Why? Their value depends on liquidity. Think of it like water in a desert; without it, your project is just dry sand.

Advantages of Token Market Making

Let’s get into the meat of the matter:

  • Price stability: Remember our water in the desert analogy? It’s the market makers who ensure that the oasis remains full, which in turn stabilises prices.
  • Increased liquidity: More liquidity means more traders, which translates to better price discovery and more trading opportunities. A win-win, right?
  • Reduction of spread: Ever noticed the difference between the buying and selling price? That’s the spread. Market makers narrow it, making trades cheaper for everyone.
  • Trust and credibility boost: In a world of scams and fly-by-night projects, having a market maker can be your badge of legitimacy.
  • Attraction for new investors: More liquidity and stability? Sounds like a siren call for potential investors.

Common Strategies in Token Market Making

Ever heard the saying, “There’s more than one way to skin a cat”? Well, in token market making:

  • Passive and active market making: It’s about balancing activeness with patience.
  • Inventory risk management: The art of not putting all your eggs in one basket.
  • Pegged orders: Keeping orders at a fixed spread from the market price.

Challenges in Token Market Making

It isn’t always a bed of roses:

  • Volatile crypto market: Cryptocurrencies can be a rollercoaster ride, making the job of a token market maker quite challenging.
  • Smart contract risks: In the digital world, a code’s bug can mean substantial losses.
  • Impermanent loss: When providing liquidity, one might face losses due to price changes in a trading pair.

How rojects Benefit from Token Market Making

Think of token market making as the backbone of successful crypto projects. They not only support but also elevate a project’s success. Ever heard of DeFi platforms making waves? Many of them owe their success to robust market-making strategies.

Future of Token Market Making

With the meteoric rise of decentralised finance (DeFi), token market making is bound to evolve. It’s like the dawn of a new era, and those ready to embrace it will undoubtedly prosper.

token market making


Token market making is no longer a luxury but a necessity. With the myriad of benefits it brings to the table, it’s the unsung hero behind many a crypto success story. So, next time you dive into a token project, remember the backstage rockstar: the market maker.


What is token market making?

It’s a strategy used to provide liquidity to crypto tokens, ensuring price stability and attracting investors.

Why is liquidity crucial in cryptocurrencies?

Liquidity determines a token’s price stability and attractiveness to traders.

Can token projects survive without market making?

While some might, many will struggle with price volatility and low investor interest without market making.

Are there risks involved in market making?

Yes, from volatile markets to smart contract bugs, there are several challenges to navigate.

Is market making only relevant for crypto?

No, it’s been a cornerstone of traditional finance, especially in stock exchanges, for years.

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


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.
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