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What are market makers and how do crypto markets differ from traditional financial markets? At the European Blockchain Conference in Barcelona, Cointelegraph was one of the first panels of the conference to discuss We have discussed this topic with key market makers in the industry.
Cointelegraph reporter Joseph Hall has created an analogy that cryptocurrency market makers are a lot like the cool bartenders at the cocktail parties of some very techy and shameless geeks. Their job is to keep the drink flowing. In other words, it provides liquidity and keeps the market orderly while ensuring that everyone has a good time.
Cointelegraph’s @JoeNakamoto Hosted the panel “Why Market Making Is Key to Crypto Market Recovery” at the European Blockchain Conference and eloquently explained what a market maker is. pic.twitter.com/3EoJnNXLyU
— Cointelegraph (@Cointelegraph) February 16, 2023
I mean, secretly hoping no one gets too drunk and makes a fool of themselves and ruins everything. Ultimately, the Market Maker is there to manage risk and ensure that the bouncer kicks out his Sam Bankman-Fried and other villains.
At its core, cryptocurrency market makers are the ultimate party planners, but instead of balloons, cakes and intense Spotify playlists, they use leverage algorithms and order books. Steph Winnendale, head of commercial strategy at a major crypto market maker, said: “It’s a great definition, but it implies that market makers have too much power over what they do. ‘ suggests.
“We’re really the dance floor. We’re really the music. We’re there to support the party. We’re always there. We’re there at 9pm.” and I’ll be there at 5:00 in the morning.”
Winnendale suggests that market makers are the foundation of a thriving crypto economy, not really “the bartenders who control who drinks or not.”
The bartender analogy works well for Patrick Heuser, Chief Commercial Officer at Crypto Finance. But “somebody has to do the logistics,” he explained. “Somebody has to make sure there are enough beers and drinks, and market infrastructure is very important for market makers.”
“Otherwise the market is not as attractive as it should be if you just see a fancy price screen and you can’t settle or you’re worried about clearing certain trades with certain counterparties. .”
So if the crypto economy is the party, the market makers could be the dance floor, music, and logistics.
Guilhem Chaumount, CEO of France-based market maker Flowdesk, explained that in the cryptocurrency space, “you have to keep in mind that there is not one bar, there are dozens of bars.” Did. Some of them are centralized or decentralized. They he he is open 24/7. We have 20,000 cocktails to choose from. I don’t know what it contains. ”
Moreover, “the price is neither USD nor EUR, nor is it a cryptocurrency such as Bitcoin (BTC),” emphasizing the difference between traditional financial market making and cryptocurrency market making.
When it comes to traditional finance, Chaumont said, most are “proprietary trading firms that operate with their balance sheets in an attempt to generate profits and losses.” Cryptocurrencies, on the other hand, have a more technical approach as asset pricing is infinitely more difficult.
John Murillo, Chief Dealing Officer at B2Broker, explained that after an extensive career in traditional finance, the way brokers choose market makers has not changed.
“Our approach to cryptocurrency makers is no different from my old days of evaluating trading partners, picking and choosing who we want to connect and integrate with. That is the key to creating a trusted solution. I think.”
Overall, Shawman summarized that market makers have a “great responsibility.” He said Bitcoin (BTC) may have recently regained $25,000, but the industry will not recover without the help and support of market makers.