Market making has become increasingly important for the cryptocurrency, particularly to ensure market liquidity. The concept of market making is as important as the market structure itself. The process of market making can provide opportunities for the prevailing financial markets in order to operate and function smoothly.
A Market Maker (MM) can either be a financial institution or an individual that provides bids and comes up with prices to correspond to certain marketable securities such as in the case of virtual currencies. The task of a market maker is to provide sufficient liquidity in order to balance out and reduce the price volatility and to be able to sell and buy the said marketable securities for reasonable prices.
Bitcoin exchange Bgogo announced on November 5 that it has officially started accepting applications for cryptocurrency market makers. The exchange is looking out for market makers in order to enhance liquidity, increase the trading depth and to improve the overall trading experience. The accounts of market makers benefit from zero trading fees. The MM accounts are exempted from trade mining. This includes rebate benefits from BGG and other featured coins on the Bgogo exchange platform.
In its announcement, Bgogo stated that the application and selection process will end on December 31, 2018. The market maker may start operating immediately, once the application is approved. The exchange will be releasing the new terms and conditions at the beginning of 2019. The MM accounts once approved will have a daily trading requirement that’s equivalent to 5 BTC, as reported on CryptoNinjas.
Apart from creating avenues for market liquidity, the market makers create advantages and opportunities for the investors in terms of eliminating delays in cases of orders and in ensuring that spreads are well-stabilized, as reported on Medium blog post.
Liquidity provides a clear measurement in the realm of virtual currencies as to how fast a particular cryptocurrency is sold or bought in a certain cryptocurrency market platform without compromising its value. Delays in order fulfillment can be eliminated in most cases and also be minimized to a large extent thereby reducing the worries and risks at the market participants’ end. In line with its role in providing market liquidity, market makers make it feasible for spreads to be stabilized.
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