MARKET MAKERS

WHAT IS A MARKET MAKER?

Market maker (AMM) — a participant in the crypto market who trades an asset within pre-agreed price and volume ranges:
◾️ facilitates liquidity and market depth
◾️ supports market demand stability

By the way, besides makers, there are also takers.
Those who instantly buy or sell assets are called takers and execute orders created by makers.
A market maker can be: a specialized company, a bank, a broker, or even an individual.
In financial markets, a market maker operates officially and openly, according to existing legislation and exchange requirements.

How does a market maker operate and profit?

Unlike traders and investors, a market maker earns not only from price movements — its income opportunities are much broader:

Spread. A market maker takes the difference between the Ask and Bid prices — this difference is called the spread.
For example, the current selling price (Ask) is $99, and the buying price (Bid) is $100. The market maker's orders are placed on both sides of the order book. As a result, it earns income from the difference between these offers ($1) when trades are executed.
Arbitrage. Like other major players, market makers use market inefficiencies by applying various types of arbitrage strategies.
Service fees. A market maker can receive a fixed payment for its work from the exchange or another interested party, as well as bonuses and discounts on trading operations.
OTC deals. Acting as an intermediary between large buyers and sellers, a market maker can earn a percentage for conducting such transactions.

WHICH MARKET MAKERS SUPPORT PROJECTS FROM THE INSIDER CLUB PORTFOLIO

GSR (https://www.gsr.io/)
One of the largest cryptocurrency market makers.
10 years of experience.
Licensed as a Major Payment Institution by MAS in Singapore.
[Moemate, GGX, Primex Finance, Magpie, Truflation, Credora, Aether Games, Newcoin]
G-20 Group (https://www.g20.group/)
Investment and trading company.
Operating in Switzerland since 2010.
Supports innovative cryptocurrency projects through liquidity and investments.
[Entangle, Zoth, Canza Finance]
Wintermute (https://www.wintermute.com/)
Leading cryptocurrency market maker. Collaborates with over 50 exchanges, including Binance, Coinbase, Uniswap, and Bybit.
[Struct Finance, Проект X]
Jump Crypto (https://jumpcrypto.com/)
The crypto division of Jump Trading. Provides liquidity and trading solutions.
[Magpie, Folks Finance, VRRB Labs, Port3]
DWF Labs (https://www.dwf-labs.com/)
An investment fund founded by Digital Wave Finance (DWF), a globally active cryptocurrency trading company.
[AiLayer, Soarchain]
Amber (https://www.ambergroup.io/)
A Hong Kong-based market maker. Offers clients tailored solutions based on liquidity requirements.
Supported by renowned investors: Paradigm, Dragonfly, Pantera, Polychain, Sequoia, and Tiger Global.
[AiLayer]
Web3Port (https://www.web3port.us/)
A platform specializing in market making and project development. Actively works in sectors like Web3, DeFi, and GameFi.
[Mushroom Finance]
FalconX (https://www.falconx.io/)
Trading platform. Provides professional solutions for cryptocurrency trading, including liquidity and risk management.
[GO! SmartChain AI]
Kairon Labs (https://kaironlabs.com/)
Market maker and consulting firm. Provides liquidity solutions and trading strategy using proprietary trading software.
[Canza Finance]
Nibi-Swap (Spot AMM) (https://nibiru.fi/ecosystem/nibi-swap)
Automated market maker for multi-chain assets. Offers access to swaps, pools, and related liquidity indicators.
[Nibiru.fi]
BULK (https://www.bulk.trade/)
A project from #portfolio_InsiderClub & the world's first decentralized market maker. Offers services using its own algorithm for real-time rebalancing.

CASE STUDIES OF MARKET MAKERS THAT HAVE INFLUENCED THE DEVELOPMENT OF CRYPTO PROJECTS

Jump Crypto & Solana (SOL)

The market maker significantly improved the performance and reliability of the Solana network:
This enhancement allowed the network to process over a million transactions per second per CPU core, increasing the network's throughput.
As a result, Solana further strengthened its market position.

Listing price: $0.22
ATH: $260.06
Price now: $162

GSR Markets & Safe (SAFE)

The market maker actively supports the project:
Provides liquidity and stabilizes the SAFE price.
In April 2024, GSR received 3.5 million SAFE tokens and deposited them on centralized exchanges.

Listing price: $2.36
ATH: $4.01
Price now: $1.43

Wintermute & dYdX (DYDX)

Wintermute has a significant impact on the liquidity and development of dYdX:
In 2024, Wintermute proposed the adoption of V4 software and the migration of the DYDX token to its own blockchain, dYdX, from Ethereum.
This move will eliminate high gas fees and improve the user experience.

Listing price: $2.39
ATH: $4.53
Price now: $1.43

THE STORY OF ONE MARKET MAKER, OR ONE OF THE MOST NOTORIOUS "FAILURES"

Wintermute & Optimism ($OP)

Optimism partnered with Wintermute to ensure liquidity and facilitate user acquisition of OP, allocating a temporary grant of 20 million tokens.
However, a critical error occurred:
Wintermute provided an Ethereum address with multi-signature that had not yet been deployed on Optimism.
A hacker exploited this vulnerability and stole the 20 million OP tokens.
The Optimism team described the situation:
«Wintermute began the recovery operation to transfer the multi-signature contract from layer one to the same address on layer two. Unfortunately, the attacker was able to deploy the multi-signature on layer two with different initialization parameters before the recovery operation was completed, taking control of the 20 million OP tokens. Since then, 1 million tokens have been sold from this address. The attacker could easily sell the remaining OP».
Wintermute immediately began buying back the sold tokens.
They repurchased 1 million OP and planned to buy back all tokens sold by the attacker.
Wintermute's CEO, Evgeny Gaevoy, emphasized:
«We want to clarify one thing: the initial mistake is 100% Wintermute's fault, and therefore, we will continue to buy OP every time the attacker sells to eventually restore the protocol's integrity. We understand that this could potentially cause token price volatility, and we will make every effort to smooth out this effect».
A few days later, something unexpected happened: the hacker contacted Vitalik Buterin 😳.
He sent him a transaction and a message:
«Hi Vitalik, I believe in you, just want to know your opinion on this. By the way, help verify the return address, and I will return the remaining funds. And hello Wintermute, sorry, I only have 18M (OP tokens), and that's what I can return. Stay optimistic!»
An hour later, the hacker returned 17 million tokens, which amounted to over $10.8 million, based on the transfer price of $0.54 per token.

Conclusion: Wintermute was very fortunate, and reputation played a significant role. Our takeaway is that adherence to all security protocols and attentiveness in crypto are some of the key skills.

Evgeny Gaevoy — founder and CEO of Wintermute:

In short, market making — is about providing two-way quotes on any market. So, essentially, it's literally providing liquidity. Therefore, any time you want to trade, say, perpetually on dYdX, you can see buy and sell orders. With 95% probability, these will be market makers, and more likely, ours

Alexey Andryunin — CEO and founder of Gotbit:

The first era of crypto market makers began in 2013 with GSR, the first and most respected market maker in the industry. GSR and other market makers used the same business model. A market maker enters into a contract or call option with a project, where the project's founder sends a certain percentage of the token supply to the market maker, and the market maker provides liquidity for both sides of the market in Tether (USDT) or Bitcoin (BTC). Upon the contract's expiration, the market maker returns the tokens or their equivalent value in cryptocurrency.