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Encryption Market Makers: The Invisible Force Supporting Market Liquidity
Encryption Market Makers: The Hermits Driving Market Prosperity
1. Traditional Market Maker Track
A market maker refers to institutions or individuals that provide liquidity in financial markets. Its main responsibilities are to provide liquidity and market depth for the securities trading market. Market makers typically conduct transactions between buyers and sellers in the securities trading market and provide quotes in the market so that other traders can buy or sell based on those quotes.
The main goal of market makers is to profit from price differences during asset price fluctuations, therefore they usually employ algorithms and other techniques to analyze the market, identify opportunities, and execute trades quickly. Market makers may trade in various markets such as stocks, forex, commodities, and bonds.
1.1 Industry Overview
The role of market makers in financial markets is very important, distinguished by their uniqueness from other market participants. Specifically, market makers undertake six main functions:
The clients of market makers mainly include: traders, investment institutions, high-frequency trading firms, individual investors, and other financial institutions.
Necessary conditions for a Market Maker Company 1.2
To establish a market-making company, the following requirements must be met:
1.3 Operating Model and Market Making System
Market makers provide liquidity by quoting bid and ask prices ( for buying and selling ), and their operating model generally includes the following steps:
1.4 Profit Model
The profit model of market makers usually comes from the difference between buying and selling prices. Market makers simultaneously quote both buying and selling prices on the trading platform, known as "two-way quotes." When a customer places an order, the market maker will execute it instantly and then sell the same security at a higher price or buy it at a lower price, thereby obtaining the profit from the price difference.
1.5 regulatory and compliance requirements
Market makers must strictly adhere to the regulatory requirements of the Securities and Exchange Commission ( SEC ) and the Financial Industry Regulatory Authority ( FINRA ), and comply with securities laws. In addition, market maker firms must also comply with requirements related to compliance and anti-money laundering.
1.6 Future Development Trends
The long-term challenges faced by market makers include:
Opportunities and challenges coexist. With the continuous development of the global financial markets, market-making companies will have more opportunities to participate in the market by providing liquidity services and market making, thereby earning higher profits.
2. Encryption Market Makers
Market makers in the encryption industry are essentially not much different from traditional finance; both provide liquidity to the market, quickly open and close positions, and profit from the bid-ask spread. However, there are vast differences in operating models, technology, risk management, and regulation.
2.1 Development History
The development of market makers in the encryption market can be divided into three stages:
![The Hidden Ones Behind the Encryption Market Makers: Promoting Market Prosperity, Crossing Bull and Bear Cycles])https://img-cdn.gateio.im/webp-social/moments-eb3a691f5c831068400f7f77dfde3c7e.webp(
) 2.2 encryption market maker's operating model
The encryption market-making process generally includes the following steps:
2.3 Market Making Technical Threshold
The main technologies that encryption market makers need to master include:
2.4 Trading Platform and Market Maker
There are two forms of cooperation between trading platforms and market makers:
2.5 Project Party and Market Maker
The relationship between the project party and the market maker is mainly established through the market maker providing liquidity services to the project party. The role of the market maker has 3 points:
2.6 The profit model of encryption market makers
The main source of profit for encryption market makers:
2.7 Market Maker Evaluation Factors
Common metrics for evaluating market-making teams include:
![The Secret of the Ten Thousand Characters: Promoting Market Prosperity, a Hermit Who Survives Bull and Bear Cycles]###https://img-cdn.gateio.im/webp-social/moments-dc002d93b2fe033696fbc9b819a939c0.webp(
3. Risk Analysis and Management of Encryption Market Makers
) 3.1 Regulation and Compliance
Encryption market makers are still in a grey area of regulation, lacking clear legal and regulatory framework support in most countries and regions.
3.2 Market Risk
The main risks faced by market makers in the encryption market:
3.3 On-chain and off-chain risks
The risks off-chain are generally transaction risks, such as the integrity of historical data, defects in strategy model design, system failures, etc.
On-chain risks include vulnerabilities in smart contracts, public chain forks, or slowed transaction speeds.
3.4 Risk Management
To control risks, the market makers will take the following measures:
![A Comprehensive Analysis of Encryption Market Makers: Promoting Market Prosperity, A Hermit Crossing Bull and Bear Cycles]###https://img-cdn.gateio.im/webp-social/moments-a388891a16db180787af21645d263001.webp(
4. Typical Case Analysis of Encryption Market Makers
) 4.1 FTX Collapse and Alameda Research Bankruptcy
Alameda Research was founded in 2018 and is headquartered in California, USA. After the FTX collapse, Alameda Research went bankrupt, leading to a lack of market liquidity.
4.2 Wintermute and DeFi hacking incident
Wintermute Trading is a cryptocurrency market maker headquartered in London. In September 2022, its EOA wallet was hacked, resulting in a loss of $160 million, possibly due to the use of the Profanity tool to create vanity wallets.
4.3 GSR Market
GSR Markets is an algorithmic digital trading company based in Hong Kong. Recently, GSR has been collaborating frequently with various project parties, such as StarGate.
![In-depth analysis of encryption market makers: Promoting market prosperity, crossing the bull and bear cycles of the hermit]###https://img-cdn.gateio.im/webp-social/moments-b6b8285940e7edf98153fc0e3db9983a.webp(
5. Decentralized Market Makers
Anyone participating in on-chain market-making can become a decentralized market maker, mainly in three forms:
![Unveiling the Encryption Market Maker: Promoting Market Prosperity, the Hermit Who Crosses Bull and Bear Cycles])https://img-cdn.gateio.im/webp-social/moments-464db7117177a6e56f51a00c3b2c39a1.webp(
6. Encryption Market Maker Development and Challenges
The future development trends of encryption market makers:
Main challenges:
![Wanzi Qidi Encryption Market Maker: Promoting Market Prosperity, Crossing the Bull and Bear Cycles of the Hermit])https://img-cdn.gateio.im/webp-social/moments-5a22d0eeb1e053b46ee5c587586da183.webp(
7. Thoughts on Investment Direction
You can focus on the following investment directions:
![The Hidden Ones Behind the Encryption Market Makers: Promoting Market Prosperity, Crossing Bull and Bear Cycles])https://img-cdn.gateio.im/webp-social/moments-9391afa0944459e802658342eba1356d.webp(
![A Comprehensive Analysis of Encryption Market Makers: Promoting Market Prosperity, Crossing the Bull and Bear Cycles])https://img-cdn.gateio.im/webp-social/moments-da945270f5ce66c2953cf4c918296649.webp(
![The Comprehensive Analysis of Encryption Market Makers: Promoting Market Prosperity and Crossing Bull and Bear Cycles])https://img-cdn.gateio.im/webp-social/moments-581b605e16cbb4c0f73c5d23eeb161c5.webp(
![The Hidden Figures of Encryption Market Makers: Promoting Market Prosperity, Crossing Bull and Bear Cycles])https://img-cdn.gateio.im/webp-social/moments-25162f79d68691cf8ce8df2fd49d1dc5.webp(
![Wanzi Deep Dive Encryption Market Maker: Promoting Market Prosperity, Crossing Bull and Bear Cycles of the Hermit])https://img-cdn.gateio.im/webp-social/moments-60bbfd1b80662974c0527c7713da3580.webp(