Market makers are one of the most widely used and widely misunderstood entities in crypto. Indeed, many retail users harbor a misconception about what they do and why they do it. For the avoidance of doubt, the leading market makers operate ethically to provide liquidity for crypto projects launching new tokens and to match the bid-ask spread for existing ones.
Rather than being a force for good or bad, market makers are neutral: they’re neither here to pump your bags nor to dump them. Instead, their job is to ensure that when you wish to trade a particular token, you can do so easily with minimal slippage. As an “invisible force,” it can be hard to appreciate the service market makers undertake in bringing a degree of stability to crypto’s volatile markets. But take them away and you’d know about it all right.
Without market makers, the bid-ask spread would instantly widen on high, low, and mid-cap assets, resulting in sudden price swings and sluggish trading activity, especially for smaller or newer tokens. To illustrate the critical role that market makers play and how they play it, let’s consider three providers in turn. You likely already know their names. But their methodology is almost certainly a mystery. Let’s see if we can demystify it and shine a light on the work MMs do behind the scenes to keep crypto ticking over.
DWF Labs
DWF Labs is best known for its web3 investments these days, but market-making remains its bread and butter. Its market-making service supports over 60 top exchanges and the company boasts a portfolio of more than 700 projects. DWF Labs combines high-frequency trading with algorithmic strategies to deliver optimum crypto liquidity. Having been in the market-making business since 2018, DWF knows the game inside out, which is why it’s the first name that nascent projects will typically call when they have a token to issue.
There are no guarantees in crypto when it comes to TGEs and DEX/CEX launches, but when you bring DWF Labs on board, there’s a very good chance that the event will be a success. It’s completed more rodeos than perhaps any other firm in the industry, routinely providing the liquidity and buy-sell activity that supports healthy and organic token growth. This is particularly essential for projects at the start of their life cycle when an experienced market maker serves as the bridge between a token’s potential and its immediate reality as it emerges kicking and screaming into the world.
GSR
GSR is a leading crypto market maker that brings over a decade of expertise to the table. Headquartered in London with a global presence, GSR specializes in providing liquidity and advanced trading solutions for spot and derivatives markets. The firm serves a wide range of clients including token issuers, exchanges, and institutional investors, and, like DWF Labs, makes use of proprietary algorithms to optimize liquidity.
What sets GSR apart is its ability to navigate all market conditions – bull, bear, and everything in between – ensuring consistent performance for its partners. Its tailored risk management tools and tight spreads make it a go-to choice for large-scale traders looking to minimize costs and maximize efficiency. Beyond its technical prowess, GSR Markets is known for its strategic collaborations and institutional-grade services.
The firm has worked with over 100 token projects, helping them achieve the liquidity they need to ensure users can swap native tokens with confidence. GSR’s services allow traders to efficiently enter and exit positions and also enable rising projects to satisfy the needs of larger players who are looking to execute swaps with size.
Wintermute
Wintermute, founded in 2017 and based in London, rivals DWF Labs for reputation and is comfortably a top-three market maker. The firm provides liquidity for over 350 trading pairs across centralized and decentralized exchanges, though it’s within DeFi that its reputation as a best-in-class market maker has been forged.
Wintermute’s strength lies in its advanced technology stack, which uses AI-driven algorithms to detect market opportunities and execute trades with minimal latency. This precision ensures tight spreads and robust liquidity, even for volatile or low-volume assets. These capabilities make it a favorite among exchanges and ambitious token projects aiming to grow their market share.
While some market makers steer clear of decentralized finance altogether, preferring to focus on institutional services for CEXs, Wintermute actively supports decentralized protocols. Although its focus on high-volume trading and DeFi might not suit every small project, Wintermute’s adaptability and 24/7 market coverage have earned it a stellar reputation.
Market Makers Make Crypto
Market makers such as DWF Labs, GSR Markets, and Wintermute are an intangible force that keeps the crypto market fluid. You can’t easily visualize their services, short of spotting the number of bids and asks on an orderbook exchange and knowing that a market maker is behind the scenes running algos that keep everything running. But should the industry’s market makers power down their algos and withdraw their liquidity overnight, you’d know about it all right. It would be a shock as seismic as Bitcoin miners powering down their ASICs en masse.
It would be extremely difficult, if not impossible, to launch a token without the support of a market maker nowadays. For projects with serious intent, which aspire to live longer than a few weeks, and have aspirations of landing tier-one exchanges and omnichain liquidity pools, market makers aren’t a luxury – they’re a necessity and the bedrock for everything that comes next.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
