The token market making is the provision of liquidity to digital assets for buyers and sellers on centralized (CEX) or decentralized (DEX) crypto exchanges. It’s conducted by companies or individuals called market makers, and it ensures that the order books are well-filled, narrows spreads and encourages investors to trade.
Getting an ICO off the ground is tough enough, and maintaining interest, growth and trading volume at an acceptable level is even harder. There will always be a point where naysayers start to outnumber the fans and momentum slows, so if you want your token project to have the best chance of success there are a number of important things that need to be right.
First of all you need to get legal cover and write a white paper. Secondly you need to make the token. Thirdly you need to build community and finally you need to find a platform where it can be sold. All of which are difficult to achieve without a healthy trading ecosystem, but the most challenging of all is maintaining growth and momentum after the initial inflection point. This is where most token sales fail.
There are a lot of reasons why this happens, but the main issue is liquidity. When a token goes public, the demand for it is often higher than the supply and this leads to low market activity. This has several detrimental effects on the token project.
Low activity often leads to a thin order book and high spreads, which puts off new investors. The illiquidity can also lead to early investors selling their positions, which in turn drives the price down. Finally, a lower token price makes the project less attractive to potential investors and partners.
To address these issues token projects need a solution like MMaaS which is a fully transparent and scalable model for market making that provides full control over liquidity at all times, even in the midst of market turbulence. Unlike traditional market makers which operate as proprietary traders and have to deploy their own funds, the MMaaS solution does not involve a loan of tokens and is therefore completely free of systemic risk.
By using a sophisticated algorithmic strategy MMaaS helps to maintain liquidity and promotes a healthy order book, ironing out the demand and supply imbalances and promoting healthy trading conditions. This allows for a more sustainable long term liquidity strategy for the token project and ensures that investors can continue to buy the token at a fair and reasonable price. This helps to keep the price of the token stable and prevents any sudden price movements that could potentially damage the project’s reputation. This in turn can help the token to gain traction in the market and boost trading volumes. The higher the trading volumes are the more visible the project will be to consumers, partners and investors which can further boost the popularity and value of the token. So if you are looking for a way to help your token project sustain and grow its liquidity, then the answer is simple – a professional market maker.
