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What is Market Maker? Everything about Market Maker

  1. 1. What is Market Maker?
  2. 2. How Market Makers Work
  3. 3. Market Maker Differentiation
  4. 4. Why is Market Maker important?
  5. 4.1 Ensuring the market remains liquid
  6. 4.2 Always update prices to reflect market
  7. 4.3 Market Price Adjustment
  8. 5. How Do Market Makers (MM) Make Profits?
  9. 6. 5 Biggest Market Maker in Crypto
  10. 6.1 Alameda Research Venture Fund
  11. 6.2 Alpha Theta
  12. 6.3 GSR Market
  13. 6.4 Kairon Labs
  14. 6.5 Bluesky Capital

What is Market Maker? The term Market Maker is now very popular in the industry 4.0 era. So what is the unique role of the Market Maker? To learn more about this term, please read and follow the following article of BHO Network!

1. What is Market Maker?

Market Maker is a business organization creating liquidity in the market by buying and selling stock or Crypto. In addition, these market makers are always willing to trade at publicly quoted prices. Usually, Market Maker is a large brokerage and banking company. However, even individuals can become a market maker.

Market Maker was born to create liquidity in the market

And as the name suggests, market makers make markets. More specifically, they create liquidity in the market by being willing to buy and sell tokens and digital assets.

Most importantly, Market Maker helps other transactions go smoothly. Without market makers, the market would probably get no liquidity. Transactions would not be easily executed.

2. How Market Makers Work

To give you a better understanding of how Market Makers work, follow an example below:

When you sell 5,000 tokens, a market maker buys it from you for a price. That price is called the bid price. They will then return and sell that token to the buyer at the ask price. These Market Makers can then sell the purchased tokens to broker-dealers in their exchange.

Market Makers (MMs) sell tokens to other companies - broker-dealers

Through this example, remember that when market makers buy Crypto, they don't always have someone waiting to buy it right away

3. Market Maker Differentiation

Usually, banks and brokerage firms provide market-making services. However, in the era of cryptocurrencies gradually becoming popular today, Market Makers have evolved to offer new types of services specifically for this field.

Market Maker has developed new types of services that set itself apart from the previous generation

Here are a few ways in which today's crypto market makers differ from their predecessors:

  • DeFi markets work non-stop, they operate 24/7. Also, most of the Market Makers in this market are monitored 24/7 by their respective experts, which can be seen as an advantage.
  • Following Blockchain innovation and nascent cryptocurrencies, Cryptocurrency-specific exchanges have rapidly grown in number
  • Liquidity is even more important in the DeFi market because the platform will help tokens appear gradually in this volatile market.
  • Furthermore, crypto-related exchanges are both very new and very large in number. Meanwhile, for stocks, users will have a certain number of shares and a fairly small number of established exchanges, including Nasdaq and Nyse.

4. Why is Market Maker important?

With many critical roles, Market Maker is indispensable in today's financial market. Here are some major functions of market makers:

4.1 Ensuring the market remains liquid

Market Makers ensure that the market remains liquid at all times, which is vital for transactions. Market makers are also ready to "make a market," meaning they can trade at publicly quoted prices and create a more liquid market.

Market Makers Create Liquid Markets

4.2 Always update prices to reflect market

Supply and demand are also heavily influenced by market makers because they are the ones who regularly update prices to reflect the current market.

It is important to note that Market Makers must constantly update their bid and ask prices to reflect market conditions accurately.

Market Maker has to update bid and ask prices regularly

4.3 Market Price Adjustment

Furthermore, Market Makers play a crucial role because they will help regulate Cryptocurrency tokens in the market and set reasonable prices based on supply and demand in the market. They can also help increase the price of an undervalued Token or lower it when it is at a high price.

Market Makers can adjust prices

5. How Do Market Makers (MM) Make Profits?

In the traditional financial market, for Market Makers (MM), Spread is one of the main factors in earning profits.

Spread, also known as Bid - Ask Spread, is the difference between a financial instrument's bid price and the ask price at a given time. Moreover, in some exchanges, although known to not charge fees (commission is 0), all are included in the Spread fee in that exchange.

Example: When an investor buys shares on an exchange, they see a bid price of $99 and an ask price of $101, which means that when the broker buys the stock for $100, then sells to potential buyers for more than 1 USD. Through high volume trading, a small spread also generates a large profit.

An example of Market Maker (MM) profiting from Spread

6. 5 Biggest Market Maker in Crypto

What is Market Maker Crypto? Let's find out with BHO Network the Top 5 Market Makers creating the largest Crypto market today.

6.1 Alameda Research Venture Fund

Up to now, Alameda Research is one of the largest Market Makers in the world, with more than 100 million USD in the field of Blockchain and Crypto.

The venture capital fund was established in October 2017, and so far, the fund has operated on all major global exchanges. With such a large market, Alameda Research can trade between 1 - 10 billion USD in derivatives and cryptocurrencies.

Alameda Research Venture Fund was established in October 2007

Alameda Research Fund Features:

  • Based on their proven research techniques, the algorithms are neutral to the trading market and the benefits of the partnerships that make up the market.
  • A complete trading system can ensure OTC with straightforward, tight spreads.
  • The development team is all members with long experience from famous platforms like Facebook and Google.
  • The fund can operate globally and be traded on various exchanges.

6.2 Alpha Theta

Alpha Theta is Market Maker that focuses on algorithmic and robotic trading. Alpha Theta is located in Toronto, and its strategy is to design to fit the project's needs.

The most significant advantage of Alpha Theta is that they are very actively involved in projects that can build a reputation and grow more and more in the future.

Alpha Theta is growing in the DeFi market

The basic features of Alpha Theta:

  • Alpha Theta owns a team of talented engineers who have created powerful algorithms specifically designed for the DeFi market.
  • Alpha Theta always pays special attention to AML / KYC strategies to follow its operating principles.
  • In addition, they have extensive data transparency, allowing investors to track market movements easily.
  • One can use special aids such as robots to execute different strategies on multiple exchanges.
  • A dedicated trading desk can operate 24 hours a day.

6.3 GSR Market

GSR Market is in the 3rd position in the Top 5 Market Maker. It's an algorithmic cryptocurrency trading company in Hong Kong.

They use self-researched and created software to provide execution solutions for some assets like Crypto, so it can be said that GSR Market offers liquidity.

GSR Market Company has also developed many trading models integrated with more than 30 Pools, and the transaction fees are pretty low on the market today.

GSR Market has implemented many different big and small trading models

Some features of the GSR Market:

  • It has a professional leadership team and a strong team of technical experts from leading financial institutions.
  • GSR Market is designed with a clear risk management strategy for those who are challenging to manage.
  • GSR Market's proprietary trading technology can be modified to the extent required by the trade.
  • GSR Market's selling and aggregation strategy is adjusted for liquidity and volatility over time so that investors will get the good price they want.

6.4 Kairon Labs

In the opinion of experts, they think that Kairon Labs is Market Maker in this field.

Kairon Labs is located in the Netherlands and Belgium. They specialize in using proprietary, hand-made software to provide market makers with tokens to operate effectively.

Kairon Labs has become one of the Market Makers in the crypto space. They are known for their enterprise-grade algorithms and understand the value of building algorithms for each custom project.

Compared to their competitors, they have a considerable cost advantage, profit distribution, and algorithmic trading services of cryptocurrencies, which makes Kairon Labs extremely attractive to any potential project on the market.

However, they are always selective and value the prestige and quality of the brand. Kairon Labs consists of well-known crypto traders who have helped many exciting projects in the 2017 crypto bull market.

Kairon Labs is known for its high-end algorithms and proprietary software

6.5 Bluesky Capital

Bluesky Capital is a Market Maker with extensive experience in quantitative hedge funds and research. They come from many well-known companies such as Morgan Stanley, Merrill Lynch, and Sauma. Bluesky Capital has devised a programmatic macro investment program covering all asset classes.

In addition, they also offer high-frequency trading for cryptocurrencies and a crypto hedging program.

Bluesky Capital focuses on quantitative research and uses alpha detection and advanced investment technology. Their primary goal is to provide outstanding, risk-adjusted returns to most of their speculators.

Bluesky Capital provides profit, alpha detection, and high-tech investment

This article has provided you with helpful information about Market Maker. Hopefully, through the above sharing of BHO Network, readers have understood the importance of Market Maker and know the answer to the question: What is Market Maker?

Published on August 02, 2022

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