Crypto merchants are the invisible and unknown heroes of the digital economy, helping to maintain the stability of asset prices by maintaining a constant liquidity flow on the exchange markets. They are of vital importance for the health of cryptographic markets, but they must engage in a delicate and complex balance that few people understand. Without merchants, the liquidity of the crypto would probably dry up in a few minutes, causing enormous volatility that would shake the bones of the most seasoned traders.
Why does crypto need market manufacturers?
Nowadays, almost all new cryptocurrency projects use market manufacturers to ensure that their tokens can be exchanged. In fact, they often get involved with several market manufacturers, because insufficient liquidity is almost the fastest way to destroy an entire whole economy.
Projects must ensure that there are many liquidity to attract retail and institutional investors in their tokens. After all, people will not invest serious money in an asset if they are sure that there is sufficient demand to discharge it quickly when they need it.
Market manufacturers can also help chip creators to increase the accessibility of their assets by listing them on several exchange platforms, so that they can make sure it is available for purchase from any place in the world. Indeed, many of the most deemed centralized cryptography exchanges require that tokens have a contract with a market deemed as a prerequisite for their list.
In addition, market manufacturers can also help crypto teams to make the most effective use of their cash supply. By placing liquidity on decentralized strategic exchange platforms, they can guarantee that liquidity follows the price, without exposing these critical assets to impermanent loss.
How do merchants work?
Decideurs use a number of strategies to ensure a constant liquidity flow.
Exactly how they can do this differs from one market manufacturer to another, because everyone has their own carefully designed algorithmic negotiation software. For example, Wintermute is one of the largest market decision -makers. It uses algorithmic trading software that uses trading robots to provide rapid liquidity for exchange platforms and chip creators. Another market market, GSR, provides tailor -made liquidity and risk management solutions for digital asset creators, while supporting institutions that wish to exchange large volumes of cryptographic assets. ‘
Another well-known Crypto market manufacturer is Kairon Labs, which uses a owner algorithmic trading platform which it can quickly personalize to meet the unique needs of any project. He presents himself as a shopping market manufacturer, seeing each project he takes in partnership. For example, its business model is designed to ensure that it only wins when its customers are also gaining.
Although each market manufacturer has its own approach, as a rule, it generally follows the process below:
Publish continuous orders:
The main objective of the market is to permanently provide two prices – supply and demand price – to the manual. These quotes are made visible to each merchant, ensuring that there is always a permanent offer for anyone who wishes to exchange the assets in question. In doing so, the market market ensures that someone can always buy or sell the desired asset, without having to wait for another human merchant to be ready to match their price requested.
This work means that the market must be ready and willing to negotiate at its prices mentioned, filling orders even when the market is silent or unbalanced. By ensuring that they are always available, the marker prevents the liquidity from drying, so that traders can buy and sell well at any time.
Maintain the inventory:
For market manufacturers to be permanently available for purchase and sale, they must maintain an inventory of the assets they cover. So, if a buyer placed an order, the market has enough assets to complete this sale. Or if someone wants to sell, he must have enough paired assets to allow this business to continue. In this way, he constantly adds to his inventory, and he will have to make sure that he always has enough available assets.
Absorb imbalances:
A sufficiently large inventory is necessary to help treat the imbalances in command books, which can occur in the event of volatility focused on newspapers. For example, if there is a sudden peak of request for a cryptographic asset, the market must be able to intervene on the other side and sell a large volume of the underlying assets. Alternatively, if there are a large number of sellers, the market must be ready to continue to buy to avoid a sudden drop in its underlying price. In doing so, market manufacturers can help assets resolve volatile conditions and prevent any significant change in its underlying price.
Dynamically adjust prices:
It is important to understand that simply because market manufacturers maintain stable prices, they cannot prevent the price from changing, and they should not try to do so either. On the contrary, their work is to ensure that liquidity is available, which forces them to keep an eye on the market conditions in force, including the volume of purchase and sale orders, price movements and market feelings. By analyzing these measures, it can then adjust its offer and request prices to reflect the state of the market and effectively manage its inventory levels to ensure that it can respond to trading requests.
Execute immediately:
The most important task of all for market manufacturers may be to be able to execute immediately, so that traders are not waiting. After all, the profitable trade requires being able to move quickly in order to take advantage of the swarms of the prices of the assets, so that the traders cannot be left pending the end of their orders. They need them to be executed when they click on this button, and therefore the market must be ready to do it in an instant.
Ethical market creation
In order for cryptographic projects to succeed, it is important to understand the difference between legitimate market manufacturers and cowboys operators who have given a bad reputation to industry. Ethical merchants seek to ensure sufficient liquidity, while cowboy operators exist simply to try to pump the prices of tokens, using handling strategies such as washing trading. Although their activities can be similar, there is a clear difference in what they really do.
The pumping of tokens prices is relatively simple and involves using automated robots to inflate trading volumes far beyond their real level, buying and selling each other in order to give the impression that there is a lot of supply and demand. The legitimate merchants, on the other hand, will only make many orders of manufacturers and takers to maintain a healthy supply of liquidity.
It may be difficult to understand the difference between suppliers of ethical liquidity and token price manipulators, which is why companies like KAiron Labs provide deep analysis tools to customers to audit its activities on any exchange platform. This guarantees that they can keep an eye on what it does to make sure it does not artificially swell trading volumes.
Merchants operate the markets
From this understanding of the functioning of merchants, it becomes clear that they are essential to create healthy and functional cryptographic markets. If market manufacturers did not exist, it would be almost impossible for people to buy and sell their assets instantly, which makes exchanges much slower, more volatile and unpredictable.
If people are constantly delayed and their transactions often fail, this will dissuade many investors from entering the market, which will result in negative consequences for the whole cryptography industry.
Market manufacturers, by narrowing bizarre spread and guaranteeing transactions are treated immediately, help reduce costs and continue to negotiate more predictable. They help cryptographic assets to brief moments of volatility and to allow a more effective price discovery, with prices that are a real reflection of supply and demand.
