'Party Starters': Stellar Event Sees Frank Discussion of Crypto Market Makers

Published on by Coindesk | Published on

MEXICO CITY - If a startup hopes to release a token without embarrassing itself in the early days, there is one important thing it should do: hire a market maker.

"Market makers provide this initial step where you can start trading," said Sergey Yusupov, the founder of Stellar infrastructure startup Apay.

Market making is widespread but generally discussed in hushed tones in the crypto space.

"Crypto matures towards transparent relationship with market makers," Blockstack CEO Muneeb Ali said later on Twitter.

Not to be confused with the fake volume industry, industry insiders say, market makers are a fixture in any mature financial market.

While other buyers and sellers can also participate, market makers help to smooth out any gaps on either side of the order book.

In order to participate in a market a market maker needs a large quantity of the asset for its sell side - and they are not going to take that risk on their own for a brand-new asset with no proven demand.

Scott Freeman of market maker JST Capital said that when his firm takes on a new client, it actually likes to do some consulting before it gets started.

"We really approach it as a partnership," he said, explaining that it's important that his team understands the startup's community, the product it's bringing to market and the founders' expectations.

Just like marketing, there's nothing that a market maker can do about a fundamentally bad product.

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