Liquidity problem for Token Projects
Many token companies raised a substantial amount of capital during the past 2 years. Unfortunately, many of them faced the following challenges:
- Lack of liquidity: investors and project founders could not monetize their investment due to a lack of liquidity in their token
- Low trading volume: traders and investors are not incentivized to trade the token because of high transaction costs due to market impact
- Price manipulation: low liquidity makes it easier for bad actors to manipulate the price of a token
- Low interest in the token project: difficulty in liquidating positions makes investors less likely to invest in a token project after launch
- Difficulty listing on major crypto exchanges: lack of market makers and committed liquidity in a token makes it more difficult to list on major crypto exchanges, giving less visibility and interest in a token project
Market Making Program for Token Projects
By adopting a market maker who provides liquidity on pre-agreed terms, token companies can potentially expect the following benefits:
- Higher liquidity: by having enough liquidity available in the token, investors and founders can invest or liquidate their positions more easily
- Higher trading volume: higher liquidity potentially attracts more interest and trading in the token due to lower transaction costs and market impact
- Lower probability of price manipulation: higher liquidity makes it more difficult to manipulate the price of a token since more capital is needed to move prices
- Higher interest in the token project: more people trading in the token and possible listing on bigger exchanges create more interest and discussion around the token project
- Easier listing on major crypto exchanges: more reputable crypto exchanges are more likely to list a token on their platform knowing that there is a market maker committed in providing liquidity 24/7
Market Making Program for Crypto Exchanges
We can support both established and new crypto exchanges to help them achieve the following potential benefits:
- Higher trading volume: traders are more likely to trade a cryptocurrency if there is enough liquidity available because of lower market impact and execution costs
- Lower probability of price manipulation: higher liquidity makes it more difficult to manipulate the price of a token since more capital is needed to move prices
- Higher interest in the crypto exchange: usually liquidity attracts more liquidity, and at the same time more interest from traders and associated revenues for the exchange
Program Highlights
| Program objective | Liquidity provision for token projects and crypto exchanges |
| Cryptocurrencies | Multiple (both large and small) |
| Crypto exchanges | Multiple (both new and stable) |
| Investment decisions | Fully systematic |
| Execution | Fully automated |
| Operational time | 24/7 |
How does Crypto Market Making Work?
Market making consists in providing liquidity on a defined cryptocurrency by submitting both bid and ask limit orders on a crypto exchange. Market makers make profit by collecting the bid-ask spread over multiple trades. A fast and stable technology and proper risk management are essential to make markets succesfully.
Program Implementation for Token Projects
The implementation of the market making program is quite simple and consists in the following steps:
- Initial review: we have an initial conversation with the client to understand their unique situation and define the objectives of the liquidity provision program.
- Market making program definition: we advise the client on the most suitable market making program, depending on trading volume, exchange, and other factors.
- Liquidity provision: we start providing 24/7 liquidity for the token based on the agreed customized market making program.
Program Implementation for Crypto Exchanges
The work closely with both new and stable crypto exchanges to establish a customized crypto market maker program, which consists in the following steps:
- Initial review: we have an initial conversation with the exchange to understand their unique situation and define the objectives in terms of liquidity provision.
- Market making program definition: we agree with the exchange on a suitable market maker program. In particular, we define traded cryptocurrency pair, with large or small traded volume, and quoting parameters and commitment.
- Exchange connection: we connect to the exchange using their API in less than a week.
- Liquidity provision: we provide 24/7 liquidity on the crypto exchange based on the agreed customized market making program.
Contact Form
For more information on our cryptocurrency market making program, please fill out the form below or send an email at info@blueskycapitalmanagement.com. A member of our team will be in touch with you shortly.