Our Approach
Intro to the way market makers manage liquidity and insight on Enflux's aproach
Last updated
Intro to the way market makers manage liquidity and insight on Enflux's aproach
Last updated
Market making involves strategically placing limit buy and sell orders in an orderbook to generate liquidity. This activity is essential for creating a balanced trading environment and involves several critical responsibilities:
Continuous Operation (24/7 Execution): Market makers must operate continuously, utilizing in-house algorithms through APIs, especially important in the 24/7 cryptocurrency markets.
Liquidity Objectives Management: We clarify liquidity objectives during the initial onboarding process. Unlike other market makers, our goals extend beyond mere volume metrics, which can be misleading in centralized exchanges. We focus on creating a robust trading environment and set measurable liquidity goals that are transparently tracked.
Inventory Management: A balanced inventory is crucial. Market makers should ideally maintain a 50/50 balance between base and quote assets to ensure a healthy order book.
Price Stability Across Exchanges: By running arbitrage strategies across different platforms, we ensure price consistency and manage profit and loss efficiently.
P&L Management: Our strategy involves safeguarding profitability while preventing significant capital losses through advanced algorithmic protections.
Custom Requirements Management: Each project may have unique trading requirements such as exchange-specific demands or liquidity adjustments during marketing events, which we meticulously manage.
Market making often functions as a "black box," leaving projects without sufficient knowledge to understand market dynamics or tools to effectively evaluate market maker performance. This can lead to possible manipulations and unnoticed subpar performance. Enflux addresses these issues by employing its expertise to conduct detailed audits of liquidity and generate insightful reports that go beyond basic data, focusing on key metrics like order book depth. Enflux advocates for dynamic, interactive reporting that allows projects to assess market trends and verify results independently. Committed to client empowerment, Enflux equips its clients with the necessary tools and knowledge to make informed decisions in the cryptocurrency market, ensuring quality assurance and transparency in market making.
During the initial phase, comprehensive onboarding sessions are conducted to align strategies with project goals and introduce team members to market making dynamics, along with setting up a transparent communication system for real-time insights and performance tracking. In the continued collaboration phase, regular meetings are held to discuss market trends, review performance, and adjust strategies, ensuring adaptability to market changes and project developments. Finally, in the long-term engagement phase, routine strategic consultations are established to discuss long-term goals and market opportunities, while continuous educational support is provided to deepen the project team's understanding of market dynamics.
Our primary goal is to sustain a healthy trading environment that benefits all participants, prioritizing long-term market health over short-term profits. This approach helps mitigate the risks associated with less active trading periods and supports consistent liquidity.
While profitability is necessary, it is secondary to maintaining a healthy market. We believe that the benefits of a well-maintained order book and satisfied traders significantly outweigh the potential profits from aggressive trading strategies.
