Market Making as One of the ICO Success Factors - The Rugby Observer

Market Making as One of the ICO Success Factors

Rugby Editorial 28th Feb, 2024   0

New cryptocurrency projects are usually released with excellently written whitepapers, a great professional team, well-planned marketing strategies, and a group of early investors. However, it can be frustrating when, after thorough preparations for listing, trading your token on an exchange is slow and has a large spread. Or when there is absolutely no trading activity with your token on an exchange. Things can become even more challenging if early investors begin to sell their tokens because of a price drop.

Most new crypto projects face this problem, and the solution is a good ICO market maker plan. An example may be the WhiteBIT crypto market making company, which helps launch new tokens and provides promotion and market-making services to boost new tokens’ organic trading volume.

What is a Cryptocurrency Market Maker?

Before we dive into how market makers help create liquidity for ICOs, let’s explain who market makers and takers are.

Market takers are those who “take” liquidity from the market. They are investors, speculators, and other market participants who aim to profit from trading. Two things are crucial for takers:

  1. Liquidity (ability to execute trades in any volume and at the best price)
  2. Speed (trades should be executed as quickly as possible).

Makers are on the other side of the market order. They supply liquidity to the market and earn money from the spread (the buy-sell price differences). Makers are always ready to buy or sell a particular crypto at quoted prices.

Importance of Market Makers in ICO

The role of crypto market makers is essential in ensuring the liquidity and market stability of a new token post-ICO. Here is what makers do:

  • Create liquidity. They ensure there are always buy and sell orders on the order books and prevent large price swings that could deter investors or traders.
  • Form the token price. Market makers help maintain price stability by reducing the impact of large trades that could move the market in one direction. It is particularly important immediately after an ICO when the market is still figuring out the value of a new token.
  • Make tokens reliable in the eyes of investors. Knowing that there is a mechanism in place to ensure liquidity and stability makes investors more likely to invest in ICOs.

Market maker role in Initial Coin Offerings is crucial. By providing liquidity and facilitating trading, they help create a market for the new tokens. This can attract new investors and increase the value of the tokens.

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