MARKET MAKING benefits…

market making

what is the market making benefits?

In this article, we are describing the market making benefits.

As market medias said, Market making is becoming increasingly important for the markets as trading volume is on the decline and as liquidity has been showing signs of drying up.

“Without the work of a market maker, the spread of trading pairs can reach up to ten percent, which negatively affects your coin trade.  With the help of them, we align the spread, which positively affects the decision to purchase a coin/token by a trader or investor, which gives the coin an investment attractiveness,” Alex explains.

State the art of market-making requires a combination of technology and trading sophistication.

The technology must be cutting edge, low-latency, capable of scaling to 10 thousands of orders, numerous concurrent pairs (ETH/BTC/USDT for example) and many crypto exchanges with different strategies.

Though, The benefits of an algorithmic market maker are:

  • The reduced indirect cost paid as a bid/ask spread
  • Increased Scalability
  • Made market less volatile
  • Introduced liquidity in hedging derivatives
  • Effectively priced markets (by interactions with arbitrage)
  • Reduced impact cost (while trading big sizes)
  • Increased liquidity across the board
  • It is 365/24/7

So, Financial markets need to operate efficiently, enabling investors and traders to buy and sell assets seamlessly and cost-effectively.

Finally, Without market makers, there would be fewer transactions and the overall efficiency decrease.

Match trade:

In the end,  market makers create a well-structured and stable financial environment and where a natural buyer and seller may not exist. So in the realm of a decentralized market, an external institution keeping the price, volume and spread safely stable seems to be a fair option to satisfy the customers, and so the exchange.