Liquidity problem for Projects
Many companies raised a substantial amount of capital during the past 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 project
- Low trading volume: traders and investors are not incentivized to trade the instrument 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 project
- Low interest in the project: difficulty in liquidating positions makes investors less likely to invest in a project after launch
- Difficulty listing on major exchanges: lack of market makers and committed liquidity in a project makes it more difficult to list on major exchanges, giving less visibility and interest in a project
Market Making Program for Projects
By adopting a market maker who provides liquidity on pre-agreed terms, companies can potentially expect the following benefits:
- Higher liquidity: by having enough liquidity available in the project, investors and founders can invest or liquidate their positions more easily
- Higher trading volume: higher liquidity potentially attracts more interest and trading in the project 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 project since more capital is needed to move prices
- Higher interest in the project: more people trading in the project and possible listing on bigger exchanges create more interest and discussion around the project
- Easier listing on major exchanges: more reputable exchanges are more likely to list a project on their platform knowing that there is a market maker committed in providing liquidity 24/7
Market Making Program for Exchanges
We can support both established and new exchanges to help them achieve the following potential benefits:
- Higher trading volume: traders are more likely to trade an instrument 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 project since more capital is needed to move prices
- Higher interest in the 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 projects and exchanges |
| Projects | Multiple (both large and small) |
| Exchanges | Multiple (both new and stable) |
| Investment decisions | Fully systematic |
| Execution | Fully automated |
| Operational time | 24/7 |
How does Market Making Work?
Market making consists in providing liquidity on a defined instrument by submitting both bid and ask limit orders on the 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 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 project based on the agreed customized market making program.
Program Implementation for Exchanges
We work closely with both new and stable exchanges to establish a customized 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 products, 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 exchange based on the agreed customized market making program.
Contact Form
For more information on our 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.