Market makers in the crypto industry: party planners or bartenders?

What’s a market maker, and the way do they differ within the crypto and conventional finance markets? On the European Blockchain Convention in Barcelona, Cointelegraph mentioned the subject with key market makers within the crypto business throughout one of many convention’s first panels.

Cointelegraph reporter Joseph Corridor drew up the analogy that crypto market makers are very like cool bartenders at a really high-tech and unashamedly nerdy cocktail get together. Their job is to maintain the drinks flowing — present liquidity and guarantee everybody’s having an excellent time — whereas sustaining order out there.

Which means they secretly hope that nobody will get too drunk, makes a idiot of themselves and ruins all the pieces. Finally, market makers are there to handle threat and ensure the bouncers kick out the likes of Sam Bankman-Fried and different unhealthy actors. 

In essence, crypto market makers are the final word get together planners, however as a substitute of balloons, cake and a banging Spotify playlist, they use leverage algorithms and order books. The pinnacle of business technique at a big crypto market maker, Stef Wynendaele, instructed “It’s an important definition, however it implies an excessive amount of energy to what a market maker does.”

“We’re truly the dance flooring. We’re truly the music. We’re there to assist, you already know, the get together. We’re there always. We’re there at 9 pm and we’re there at 5 am within the morning.”

Wynendaele instructed that market makers are the foundations of a thriving crypto financial system and that they’re not, actually “the bartender who controls who drinks or not.”

Stef Wynendaele of Keyrock talks throughout a panel dialogue on the European Blockchain Convention. Supply: Jose Val Bal

The bartender analogy works effectively for Patrick Heusser, the chief business officer at Crypto Finance. Nevertheless, “Somebody has to do the logistics,” he defined. “Somebody has to ensure there may be sufficient beer within the again and stuff for the drinks — and market infrastructure is tremendous essential for market makers.”

“In any other case, you simply have fancy flashing worth screens, and if you happen to can’t settle or if you happen to’re not comfy with settling sure trades with sure counterparties, {the marketplace} will not be as engaging correctly.”

So, if the crypto financial system was a celebration, the market makers could possibly be the dance flooring, the music and the logistics.

Guilhem Chaumount, CEO of French market maker, Flowdesk, defined that we should keep in mind that within the crypto house, “it’s there’s not one bar; it’s dozens of bars. A few of them are centralized or decentralized. They’re open 24/7, 365. You will have so many cocktails, 20,000 cocktails accessible. You don’t know what’s in them.”

Chaumont listens in through the panel dialogue. Supply: Jose Val Bal

On prime of that, “The costs will not be in U.S. {dollars} or euro and Bitcoin (BTC) and no matter crypto,” underlining the excellence between conventional finance (TradFi) market making and crypto market making.

For conventional finance, Chaumont defined, it’s principally “proprietary buying and selling companies working off their steadiness sheet, attempting to generate revenue and loss.” There’s a extra technological method in crypto as a result of the property are infinitely tougher to cost.

Murillo spent years in Tradfi earlier than working in crypto. Supply: Jose Val Bal

Following an intensive profession in conventional finance, John Murillo, a chief dealing officer at B2Broker, defined how brokers decide market makers stays the identical: “You simply select which get together to attend as a result of everybody has a celebration.“

“Our method on crypto makers is not any totally different than it was in my previous days, the place you assess counterparties, the place you decide and select who you wish to join and combine. I feel that’s the important thing to making a dependable resolution.“

In all, Chaumant summed up that market makers carry a “large duty.“ He shared that whereas Bitcoin might need lately reclaimed $25,000, the business won’t get well with out the help and help of market makers. 

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