The top crypto market makers of 2020 are Kairon Labs, GSR, Alameda Research, AlphaTheta, and Bluesky Capital.
What is crypto market making?
Market making of the crypto space is a new uprising compared to the concept of traditional market markers of the yesteryears. This article serves to provide a better understanding of what crypto market makers do. First, let’s examine what market making is by exploring an elemental understanding of the market making process.
Market making in simpler terms is an activity wherein a trader concurrently provides liquidity to both the parties (buyers and sellers) in the financial market. The market is made by quoting prices while buying and selling the asset.
The need for market makers is strong because it enables them to build efficient financial markets by reducing price volatility with fair-price discovery. Consider the case of any given asset, the difference between the selected best bid and the selected best ask is what is known as the bid-ask spread. If the market liquidity is low, the spread will be wider and vice versa. Liquid markets have a tight spread which makes it cheaper for traders to enter and exit trading positions. The spread is an important part of the overall scheme because it has an impact on the volume traded. If we have to understand it in even simpler words, market makers pave the way for tighter markets.
By ensuring tighter bid-ask spread.
The need for top crypto market makers
As explained earlier, efficient financial markets are the need of the hour. Traders and investors are aspiring to conduct trade immediately because under normal circumstances finding the right buyer or seller for the same asset, for the same price wanted by both sides and at the same time can be a herculean task. This tends to increase the gap in the waiting time. The higher the waiting time, the higher the trading costs, lower the liquidity levels, and lower the volumes. In short, it is a lose-it-all situation.
Even if there is no immediate counterparty to fulfill your order with the market maker, they still complete your order. Although it could be risky to market makers considering price changes, these risks can be hedged in several ways.
Market makers charge a nominal fee to complete the order. Since the volume of trade is very high, the spread on each asset is high and covered well which ultimately offsets the risk.
They also make use of algorithmic trading tools and automated market-making strategies that act on real-time data.
How crypto market makers are different
Market makers in the earlier years were synonymous with banks and brokerages. But now, market makers in the crypto space have evolved conceptually for the digital asset industry. The new-age crypto market-makers are different from the conventional ones in several ways:
- An extremely active entity that works round-the-clock (crypto markets are always open) with strong monitoring and holds upon little details.
- Crypto market makers are used to deal with low liquidity markets
- The use of blockchain tracking systems to gain deep market insights
- The exchanges have increased in number compared to the stocks that deal only with a few reliable exchanges like NASDAQ.
Market makers do not dictate the price but rather provide orders, reduce spreads, help in the negotiation, strategize, and provide the necessary feedback. A market maker is an expert that understands the working mechanism of order books, technical analysis, and building custom trading software tactics.
Now, let’s take a look at our top 5 picks for the top crypto market makers.
GSR Markets fundamentally is an algorithmic digital trading firm belonging to Hong Kong. It makes use of its own software for order execution solutions to several digital classes to offer liquidity. The company is credited with deploying numerous models integrated with over 30 liquidity pools taking their trading fees lowest in the markets.
What sets it apart?
- Great leadership and a robust team of technology and finance veterans hailing from top-notch world financial institutions.
- It has designed intuitive risk management strategies that are engineered for those who find it difficult to manage it.
- Its proprietary trading technology can be modified to the trading needs. Its selling and aggregating strategies adjust to real-time liquidity and volatility so that investors can really get the best price.
Kairon Labs is arguably the top market maker in space currently, certainly in 2020. Based in the Netherlands and Belgium they offer market-making for all utility tokens using their in-house proprietary software. Kairon Labs has made it to the top of the list as one of the most professional market makers in the crypto space. Famous for its custom enterprise-level algorithms, they understand the value of building algorithms specific to every project. Kairon Labs is pursued as a market maker by some of the best projects out there.
Their experience in building enterprise architecture and designing algorithms for trading has been unparalleled. Their specialty and expertise are in utility tokens and stable coins and in order to extend their expertise, they operate with their own software. The proprietary solutions they have custom-built go a long way in reducing the impact of price fluctuations, and Kairon Labs operates with full transparency and provides liquidity across a plethora of exchanges. They currently possess API connections to more than 120 exchanges.
Offering a huge advantage over their competitors in terms of lower fees, profit split, and algorithmic trading services for digital assets, this makes them extremely attractive to any potential project needing market making. However, they are extremely selective and take their brand reputation very seriously.
What sets it apart?
- The team is comprised of legendary crypto traders who were instrumental in aiding famous projects during the 2017 crypto bullrun.
- The advantage of an in-depth analysis of order books and projects.
- They function in a very pragmatic and precise manner from testing strategies and analyzing them obsessively then deploying market-making strategies that are custom tailored to each project that best fits their individual needs.
- With a 24/7 vigilance, trading strategies can be changed according to the demand of the time.
- Biweekly reports about trading volumes, P&L, and direct communication with the project through Wechat, Telegram, and Whatsapp.
- Conference calls arranged every 2 weeks to discuss future strategies.
Alpha Theta is an upcoming market maker that entered the crypto space with a bang and has made the right kind of noise. Its progress is exponential because of their focus is on the melding between algorithmic trading and bots. Alpha Theta is located in Toronto, and with their strategies customized to the needs accordion to the project needs. The best part about Alpha Theta is that they are gung ho about taking even minuscule projects, build up their reputation, and become big.
What sets it apart?
- Alpha Theta boasts of some of the most talented team of engineers who have generated robust algorithms crafted especially for the crypto markets.
- Alpha Theta is very particular about following AML/KYC policies to maintain compliance in its operations.
- They are hugely data transparent allowing the investors to stay up-to-date with market operations.
- One can utilize n number of bots for executing different strategies across multiple exchanges
- Dedicated trading desks active 24 hours a day
Almeda Research was first founded in 2017 by Sam Bankman-Fried and Gary Wang and is presently managing above 100 million dollars in assets. They are known for quantitative trading from which it makes a considerable amount of money. However, they have recently diversified into other areas like creating their own OTC trading desk and their new exchange FTX.
What sets it apart?
- Trading advantages based on their deep-set research techniques, market neutral algorithms, and market-making partnerships.
- Sophisticated trading systems to ensure tight OTC spreads.
- Decades of experienced individuals from giants like FB and Google
- Full-scale global operation enabling trading across several exchanges
Bluesky is a quant investment management firm that also has dipped its toes into market making and has been quite successful . It helps HNI, institutional investors and large ticket offices to achieve their investment goals by deploying their capital in the global financial markets. The firm currently manages a global, macro-level quantitative program.
What sets it apart?
- The firm has a rigorous and proprietary quantitative research methodology as it has invested a heavy amount in disruptive technologies.
- Continuous innovation is the mantra here as the firm is constantly on the lookout for tools and datasets and new sources of alpha.
- Bespoke risk management frameworks that ensure timely monitoring of risks related to investments.
- Provides 24/7 liquidity on the respective cryptocurrency exchanges it has APIs with
Why every project needs a top market maker
Liquidity is seen as an essential ingredient to increase trade volumes so that listing on major and more exchanges is possible. This need is effectively fulfilled by market markers because they aid in creating a market for that token, route the project in such a way that helps it discover its optimal price, and achieve price stabilization for future trading thereby maintaining tighter price spreads allowing investors to put a healthy order for the asset.
Crypto market makers have successfully filled this void especially in times when the crypto markets are evolving at a fast pace. We just hope that this list provides a crystal clear view of the project choices especially for investors who can find out the best providers they can actually work with.
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The Ultimate Guide to DeFi Lending in 2020
The spark of Defi Lending
Growing speculation and a new shift in attitudes towards financial markets has catapulted interest in DeFi lending. This is not just a trend but a long-term disruption in the lending market due to the substantial interest rate arbitrage available driving the acceleration of its growth.
DeFi lending functions a bit similar to the traditional crowdlending P2P services, but there is a core difference. In DeFi the loans are issued on decentralized platforms that lock up cryptocurrencies through smart contracts on public blockchains. It lets users supply cryptocurrencies in return for a year-on-year return. DeFi lending reduces the burden of paperwork because it uses smart-contracts. This is an on-demand service with the principle of quid pro quo where one party interacts with the other and the blockchain is a transparent conciliator that records the operation and fulfills the terms of contracts.
The unique features about DeFi lending are:
- It is permissionless meaning that anyone has the leeway to lend their assets at the barest minimum cost
- The selected lending protocols are audited meticulously. The code backup for lending contract funds is robust and uncompromising implying that security is taken extremely seriously.
- Most of the DeFi lending protocols do not expect their users to transfer ownership of their inherent assets. They do not need any approval from a third-party.
- The interest earned from lending is collated axiomatically which means that from the end-user side, there is very little maintenance work to be done to earn passive income.
- Self-administered interest rates rule the roost as interest rate fluctuations are a direct measure of supply and demand changes
What are DeFi lending protocols
Decentralized Finance is implementing financial instruments in the form of smart contracts on Decentralized blockchain networks. Decentralized is one such financial service that aims to democratize the ability to get loans. The DeFi lending protocol ecosystem has seen humongous growth over the years. Among the several reasons why DeFi lending protocols are a must, there are 3 very strong reasons to go for it.
- For a long-term crypto holder who is not interested in selling their crypto investment yet, but still has a list of bills that need to be paid, taking a loan on their crypto will help the holder pay for his/her daily expenses.
- We know that leveraged trade is executed with borrowed money; the margin is that collateral which is used to make the leveraged trade. This magnifies the investor loss or gains made on the trade.
- Lending protocols helps traditional crypto holders to earn interest higher than traditional savings
The most popular ones that are high on popularity, security and ease-of-operation are:
Most of the DeFi lending protocols can be accessed with a Web3 wallet like Metamask. Users have to source their wallet with a small amount of ETH to pay for the transactions with the capital they wish to supply. No same lending protocol has a similar risk. Our top picks are safe to lend with very little chance that your funds are compromised through any unforeseen attack.
What makes DeFi lending tempting?
A comparison of DeFi lending with heritage lending
- On one hand DeFi majorly circles around the lending of Ethereum based currencies, traditional markets focus on fiat currency. DeFi lending platforms use smart contracts to interact with currencies making them embrace ERC-20 tokens widely. Some of the most popular coins on DeFi lending platforms are DAI and USDC as they are smart breeding grounds for rapid smart-contract interactions.
- DeFi lending is permissionless meaning that the loans are hugely overcollateralized compensating for the loss of capital owing to any reason. If it is undercollateralized, immediate liquidation occurs and it is sold-off in the open-market to make sure protocol is collateralized back to what it should be. In the legacy lending platforms, loans are usually either undercollateralized or with tangible goods to avoid the case of bad debts and recovery.
- Mostly all of us at some point in time, take loans. It usually requires a process that one needs to undergo to ensure that the loan is sanctioned. That includes verification of income, the credit scores, the collaterals in question and so one and there is no sure shot way of saying that you will get what you want. But with DeFi lending there is no cap on the amount of capital required. Interest also can be collected at any moment. All you need is great network connectivity.
Most popular cryptos used in DeFi Lending
Currently, we have listed 3 hottest cryptocurrencies that are hot on DeFi lending platforms
Considered as a game-changer for the entire cryptocurrency ecosystem. It is a decentralized cryptocurrency that is stabilized against the value of the US dollar. It uses margin trading to react to changing market conditions and ultimately preserves its value heads-up against the major currencies dominating the world. Compared to other stablecoins that take the support of USD, this is backed by crypto collaterals which can be seen publicly on the Ethereum blockchain.
USD coins are pegged to USD and tokenize USD to facilitate its use over public blockchains. It can be changed back to USD anytime. With the help of ERC-20 smart contracts, issuing and redeeming USDC tokens are executed seamlessly.
Ether – the cryptocurrency of the Ethereum network is one of the most popular tokens that are decentralized making use of distributed ledger technology. It has competitive lending rates and most of the lending protocols support ETH lending as it owns the market with the second highest market cap.
Advantages of DeFi lending
Lending with Blockchain technology involved makes the offerings not just transparent but also cheaper and faster to borrowers and lenders. Leveraging on blockchain technologies with peer-to-peer lending offers several advantages.
There is no need for any paperwork or a bank account while you decide to choose a crypto-backed loan. For those individuals who are unbanked and at the lowest level of the financial pyramid and those who cannot provide KYC, this feature will certainly bring cheers.
Insignificant transaction fee
Under the lending process, when the borrower puts in the loan request, it goes to a financial institution like a bank that charges you additional fees for documentation, early payment, and whatnot. The fee in question usually adds up to considerable amounts. But on the other hand, crypto-backed loans do not carry the burden of any processing or transaction charges. Compared to P2P loans, crypto-backed loans are more value for money.
In conventional P2P lending, the major barrier is the geographical boundaries but DeFi lending opens the door to cross-border lending. This is a win-win situation for borrowers and lenders because it offers diversification. With crypto-backed loans, lenders can diversify their portfolio defying boundaries to take advantage of variegation. Borrowers also get access to a large pool of lenders who are spread globally.
The Future of DeFi Lending
DeFi lending, and lending protocols have a long way to go in terms of building infrastructures to truly support the vision, but in 2020 we are already off to a phenomenal start. In order to build DeFi lending architecture, user experience, security audits, and user education are essential.
There is enormous potential for DeFi lending to flourish because of its groundbreaking innovation, yet the future of DeFi lending is up to the efforts of the builders in developing and educating others.
It’s in all of our hands.
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TOP DEFI PROJECTS OF 2020
The top DeFi projects of 2020
The top 5 most promising DeFi projects of 2020 are Maker DAO, Polkadot, HIVE, Morpheus Labs, and Hedera Hashgraph.
Several active blockchain projects have fascinating qualities. But we place our bet on 5 projects that stand out above the rest and have enormous potential. The projects selected for this top five list are incredibly ambitious. They aim to broaden the scope of blockchain technology and decentralized finance like we’ve never seen before.
Without a doubt, there are a plethora of promising and exciting blockchain projects out there that will gradually grab the spotlight they deserve, but for now, these five are likely to change the rules of the game in their respective industry.
Maker Dao (MKR)
MakerDao, was once upon a time a minuscule project on a new blockchain. But since then, it has emerged as one of the most successful and widely used DeFi projects on the enormous Ethereum blockchain. It is a decentralized lending facility leveraging Ethereum smart contracts to automate the functioning of a lending platform. MakerDao is the most widely used and longest-running project in Ethereum’s decentralized ecosystem. To date they have 2.3M ETH locked in their protocol. It makes use of a collateralized debt position to create a stable coin DAI with its value pegged against the dollar.
What sets MakerDao apart from other projects is the manner they operate and are governed. Its governance and automation system leverages Ethereum smart contracts to perform lending and stabilization functions without a central identity.
The Maker Foundation is directing its efforts to prepare the voting community to govern the Maker protocol after decentralization. The three key elements of self-sustaining DAO which are the technical, human, and procedural elements will enable the community to administer a full decentralized marker protocol taking care of every sphere of DAO.
Just 4 days ago, it was reported that Maker DAO is voting on whether or not to extend the collateral that they currently accept for loans to real-world assets, and not just cryptocurrencies. This exciting proposal if accepted would be a major development for the space as a whole. Maker DAO definitely earns it position as one of the top DeFi projects.
HIVE is the first decentralized social media network of people, DApps, and communities. It’s almost what I envision a Reddit 3.0 to be like, but has a more fringe, underground feel to it.
It is comprised of nearly the entire dev community from Steemit that rebranded and created a new ecosystem , which is rich and diverse. This is truly a peek into the wave of the future for blockchain-based communities.
The community was concerned that the new ownership of Steemit would not uphold the original values of being censorship-resistant. So they created a masterpiece. This is a fully functioning platform that will only gain users with time, and definitely one of the top DeFi projects.
Polkadot sets out to make cross-blockchain computation a reality, a feat many projects have sought to accomplish but few have achieved. If it can for sustained period of time, it will memorialize itself in history as a top DeFi project. Blockchains are innately insulated and cannot communicate with each other, Polkadot, through their relay chain will allow blockchains to send messages to one another.
The biggest gem about its protocol is its support of the arbitrary data transfer that can be done both publicly and privately across a number of blockchains all possible with a single network. The system provides the unification of many chains called parachains which can be built through substrates, an internet model to create crypto and decentralized systems on the blockchain. They communicate through the main element called the Relay Chain which is responsible for maintaining consensus across the network.
The protocol is designed to enable the mechanism to interoperate with each other as equals of one common network. It has a software framework with which people can implement their parachains.
Polkadot has three really interesting facets:
Relay Chains: Which coordinate consensus and transaction delivery between chains.
Parachains: Constituent blockchains which gather and process transactions.
Bridges: Links to Blockchains with their own consensus mechanism
Another novel feature that Polkadot brings is the pooling of security. For example, chains that are weak will not be susceptible to a 51% attack with this implementation. Furthermore, with multiple chains running concurrently and parallel with each other, scalability can ultimately be achieved.
Morpheus Labs (MITX)
Singapore-based Morpheus labs provide enterprises with an end-to-end Blockchain as a service solution for continuous value creation. Thanks to its innovative offering, it helps organizations by granting ready-to-use development tools and applications in a simple environment with leading blockchain technologies for mass adoption. The team at Morpheus consists of agile and brilliant individuals that enable enterprises with precise deployment, prototype creation, and integration of applications using blockchain technology.
The BpaaS ensures efficient intermingling among all the resources and networks. It provides easy access and mission-relevant tools to develop and test blockchain applications using the different protocols thereby achieving cost-efficiency and a failure-proof environment within the timeframe set.
Hedera Hashgraph (HBAR)
Hedera Hashgraph is an innovative project which is the brain-child of its CTO Leemon Baird. More than just a blockchain it is a Directed Acyclic Graph (DAG) that has facilitated higher throughput speeds and almost instantaneous settlements due to higher intensity of decentralization. It supports smart contracts written in solidity which can second as a distributed storage system.
Hence, whether you are a start-up or an enterprise, Hedera as a decentralized public network strives to create the next generation secure applications like never before. Recently, LG Electronics became members of the governing council of Hedera Hashgraph, a move that signaled major confidence in the platform.
DeFi is the new genius on the block architecting technological advancement, and these companies are looking to be the trailblazers of the space. In 2020, these top DeFi projects are definitely ones to watch.
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TOP FIVE DEFI LEADERS
The Top Five DeFi Leaders of 2020 are Adam Back, Vitalik Buterin, Brian Armstong, Changpeng Zhao, and Andreas Antonopoulos. These visionaries changed the face of crypto and blockchain as we know it.
Adam Back is the current CEO of Blockstream and inventor of HashCash. He created HashCash in 1997 and it was one of the very first iterations of a digital currency. Cited by none other than Satoshi Nakamoto himself in the watershed “Bitcoin: A Peer-to-Peer Electronic Cash System”, the whitepaper that started in all. Some think he is the prime candidate for the anonymous and enigmatic creator of bitcoin. Blockstream continues to push the boundaries by furthering the evolution of DeFi. Their flagship products are The Lightning Network and The Liquid Network.
Vitalik Buterin changed the game for DeFi, crypto, blockchain, and distributed ledger technology in one fell swoop with the creation of Ethereum. This young, talented polymath took the crypto world by storm. Regarded as equal part prophet and rockstar among his peers during the famous 2017 bullrun, he became a blockchain celebrity. His leadership transformed and revitalized the entire space, bringing a new wave of thought and creativity to the landscape. His success and contributions to DeFi is demonstrated in countless ways, and Ethereum having the largest dev community is certainly one of them.
Defi and crypto may not have been where it is today without Brian Armstrong. Armstrong is the CEO and co-founder of Coinbase, the largest cryptocurrency exchange in The United States. Few will disagree that Coinbase is the best-known household name in crypto. It certainly has come a long way since its inception in 2012. In addition to what it is already famous for, Coinbase continues to be a trailblazer in the space for wallet technology, custodial solutions for institutions, and payment gateways for merchants.
Changpeng is a major industry leader in the DeFi space as the founder and CEO of Binance. Just how Brian Armstrong changed the way we bought and sold bitcoin, Zhao illuminated to crypto traders all over the globe, the world of altcoins. While other major exchanges like Poloniex and Bittrex struggled to handle the volume, Binance came to prominence at the perfect time between Q2 & Q3 of 2017. Not only could they handle the load–their interface was as beautiful as it was efficient. To this day, Binance is widely regarded as the #1 exchange in the world.
Andreas Antonopoulos is one of the most well-known thought leaders surrounding bitcoin. An early proponent of bitcoin and decentralized finance, Andreas helmed the Chief Security Offer position at Bockchain.info in 2014. Since then, he went on to author several books on bitcoin and now hosts the Let’s Talk Bitcoin podcast. An eloquent and passionate speaker, Antonopolus has educated thousands around the globe about the first digital asset that started the DeFi revolution.
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