Frequently Asked Questions
FOR TOKEN ISSUERS
Welcome to the FAQ section of our website! Here, you’ll find answers to some of the most commonly asked questions about market making for token issuers and our services. If you don’t see the answer to your question listed here, please don’t hesitate to contact us for further assistance. We’re always happy to help!
What is market making?
Market making is a trading strategy that involves placing buy and sell orders to create liquidity in a market. Market makers are traders or firms that actively quote both bids and asks in the order book in order to provide liquidity to the market. Their role is important because they help ensure that buyers and sellers are always available for a particular cryptocurrency, which can be highly volatile and prone to price swings. Market makers may also use strategies such as providing liquidity by placing large orders that are unlikely to be filled immediately in order to help stabilize the market. Overall, the goal of market makers in the cryptocurrency market is to facilitate trading and provide liquidity, which can make the market more efficient and stable.
What is liquidity?
Liquidity refers to the ease with which a financial asset can be bought or sold on a market without significantly affecting the asset’s price also known as slippage. In other words, a market is said to have high liquidity or more depth if it is able to absorb large trades without experiencing significant price movements, and it has low liquidity if it is less able to do so.
In the context of cryptocurrency markets, liquidity is an important factor to consider because it affects the ease with which traders can buy and sell cryptocurrencies. A market with high liquidity is more attractive to traders because it allows them to enter and exit trades quickly and with minimal impact on the price. Conversely, a market with low liquidity may be less attractive because it may take longer to buy or sell a cryptocurrency, and the trade may have a greater impact on the price.
Why do I need a market maker in the first place?
Exchanges are always looking for tokens and cryptocurrencies with good liquidity, and this is where market makers come into play.
Having a market maker can help a token project get listed on an exchange, as exchanges want to avoid having a “dead token” with no trading activity. Therefore, they look for projects that have already thought about liquidity and are prepared to maintain it. Market makers provide liquidity by continuously posting buy and sell orders in the order book, which helps to stabilize the market and make it more attractive to other traders. For this reason, exchanges often advocate for market-making services and may even require them as a condition for token listing. Without sufficient liquidity, a token project may be at risk of being delisted from the exchange and we don’t want that.
What are the requirements from my side?
You will need to have an active account on the exchange, as well as an inventory of assets on the account that will be available at all times for market making. This will allow Orcabay to consistently offer liquidity in the market and ensure that trades can be executed smoothly. You will need to provide Orcabay with your account API keys with trading permissions in order for Orcabay to securely post orders on the exchange.
Who provides the inventory of assets for market making?
An inventory of funds refers to the collection of digital assets (such as BTC, ETH, DOGE, USDT, USDC) that are constantly available for the market maker to place in the order book and be used to provide liquidity. The inventory assets are provided by the token issuer on their exchange account(s).
How much inventory of assets do I need?
The answer depends on your liquidity goals. If you would like more details, we would be happy to help you! Please send us an email and our team of experts will contact you.
How do I know that I will have control over the assets?
You always have full access to your exchange account and full control over the assets. Orcabay will never ask you to transfer your assets to us. All we will need from you is trading API access. Rest assured, we do not require withdrawal permissions.
Why should I choose Orcabay?
At Orcabay, we are experienced market makers on whom you can rely. Our market-making solution allows for fully customizable bid-ask spreads, order levels, order amounts, and inventory management to meet the needs of token issuers. We provide:
On which exchanges does Orcabay operate?
We operate on over 30 different cryptocurrency exchanges. If you are listed on another exchange, we can integrate them quickly and we will not charge additional fees.
What are the steps to start working with Orcabay?
The whole process of a market making service for token issuers is straightforward. The process can be divided into 5 steps:
Is market making profitable?
We see market making as an optimisation process of two metrics: tight spread and profit. The reality is that you cannot achieve both at the same time. You cannot have a tight spread and have a profit, or you cannot have a profit without having a really wide spread. If we set the bid-ask spread wider we can make a small profit or we can prioritize narrow bid-ask spread for best user trading experience.
What is the price and profit protection mechanism?
We provide different price protection mechanisms. Within certain limitations we can defend the price from falling or rising too quickly, we have profit optimization mechanisms in place to eliminate toxic trades that are trying to game market makers, taking profits. We have logic to eliminate price differences (arbitrages) between multiple pairs.