Crypto Market Making Explained: The Secret Keystone To A Token Project's Success | HackerNoon

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Even highly liquid markets experience high volatility. Crypto market making is, therefore, an essential element for any token project. - cc: AutowhaleThomas AutowhaleNet cryptocurrency trading

, such as futures contracts or options, to mitigate the impact of price movements on their positions. More on that later in the article.Market making can also help to improve the accuracy of price discovery or the process of determining the fair value of an asset. By applying market-making strategies, crypto market makers can provide information about the supply and demand for the asset, which can help to inform the market about the asset's value.

Simple market making involves continuously buying and selling the token at a fixed spread, or the difference between the buying and selling prices. This strategy can help to provide liquidity to the market and reduce the bid-ask spread, but it may be less effective in volatile markets.Adaptive market making involves using algorithms to automatically adjust the market maker's buying and selling prices based on market conditions, such as volume and price movements.

Other strategies, such as arbitrage trading strategies, may need to be considered - especially when looking to make markets across multiple venues, including decentralized exchanges.

 

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