Why tokens need market makers, and what a good one looks like

2026-10-23 · 9 min read · All notes

What a market maker does for a token

A market maker keeps standing offers to buy and to sell your token, all day, on every exchange where it trades. The gap between those two prices is the spread. When the spread is tight and there is real size on both sides, a holder can buy or sell at a fair price at three in the morning without moving the market. When it is wide or one-sided, every trade costs more, small orders print ugly candles, and the chart starts to look manipulated even when nobody is manipulating it.

That is the whole job: two-sided quotes, a tight spread and depth on both sides. Everything else a market maker might promise you, higher prices, more volume, a listing, is either not in its gift or not legal to sell.

A short history

Stock exchanges have had people with this job for a century. On the New York Stock Exchange they were called specialists; in October 2008 the exchange replaced them with Designated Market Makers, firms with an affirmative duty to keep an orderly market and to meet minimum quoting requirements in their assigned stocks [2]. The idea that liquidity is a duty you can measure, not a favour, comes from that world.

Crypto took a different route. Between 2017 and 2021 “market maker” often meant a desk that borrowed the project’s tokens interest-free, added its own stablecoins, and took a call option to buy the borrowed tokens later at a fixed price. The desk earned most when the price went up, so its interest was the price, not the spread, and projects handed over a large slice of their supply to a black box [5]. Some desks went further and sold volume outright. In October 2024 US prosecutors charged four market-making firms with wash trading for client tokens, one of them advertising a dashboard where clients could order “millions in wash trades per day”, and seized more than $25 million in cryptocurrency [1].

The direction since then is the opposite: the project keeps its own funds, the market maker gets access that can trade but not withdraw, the fee is a flat retainer rather than an option on the price, and the project can watch every order. In the EU, MiCA’s market-abuse rules have applied to crypto-assets since 30 December 2024, so insider dealing and manipulation around a token are now offences in the same family as they are for shares [3].

What changed for token teams

Exchanges now review listed pairs and name trading volume and liquidity among the factors that decide whether a token stays listed [4]. A quiet order book is no longer just embarrassing; it can cost the listing you paid for. Funds and larger holders look at the book before they look at the roadmap. And on-chain order books such as Hyperliquid now sit next to the centralised exchanges, with a different custody model: your wallet, a signing key that cannot withdraw, rather than an exchange account and an API key.

Signs your token needs one

You can check all of these yourself in a few minutes. Your spread is wider than tokens of similar size. The book goes one-sided for hours in the quiet part of the day. A few hundred dollars would eat through the orders near the mid price. Small trades gap the price by several percent. The exchange has tagged the pair or asked about liquidity. Your previous market maker left and the quotes went with it. If two or more of these are true, the spread you are paying is already a cost; the question is only who closes it.

The six checks, with the numbers to look for

What a quality market maker looks like

Never takes custody. It trades on your exchange account, managed sub-account or wallet with access that cannot withdraw or transfer, and it checks those permissions with you before the first order.

Is transparent. You see every order and fill live in a read-only view, and you get statements you can recompute from the exchange’s own records.

Is paid a flat fee in stablecoins, in arrears. No token loan, no option on your price, no share of the upside.

Is measured on quoted spread and two-sided uptime, from public exchange data, with depth targets agreed per venue and fee credits when it misses. Never on price or volume.

Says plainly which venues it covers, centralised and on-chain, and does not claim “any DEX”.

Will walk you through switching it off in one step, and has tested that with a client.

Questions to ask any market maker

Where will my funds sit, and can your access ever withdraw or transfer them?

Which exchanges can you quote on, and which of them have you actually traded on?

How do I switch you off, and have you tested that with a client?

How are you paid? Is any part of it a token loan, an option or a share of price gains?

Which numbers are you measured on, where do they come from, and can I check them myself?

Can I see every order and fill live, and will I get a statement I can recompute?

Do you trade the same pair for your own account or for another client?

What happens to my orders if your systems go down, and who gets paged?

Where to go from here

If your token trades on a centralised exchange, the setup is your account and a trade-only key. If it trades on an on-chain order book, it is your wallet and a signing key that cannot withdraw. Same promise, two mechanisms. Send us the token symbol and we will reply with a review of your own order book against its peers, built from public exchange data, with no obligation.

CEX or DEX: the two setups · What our access can and cannot do · Request a liquidity review

Sources

U.S. Attorney’s Office, District of Massachusetts, “Eighteen individuals and entities charged in international operation targeting widespread fraud and manipulation in the cryptocurrency markets”, 9 October 2024. www.justice.gov
SEC Release No. 34-60756 (2009) on the NYSE New Market Model: specialists replaced by Designated Market Makers in October 2008, with affirmative obligations to maintain an orderly market and minimum quoting requirements. www.sec.gov
Forvis Mazars, “Prevention and prohibition of market abuse involving crypto-assets” (MiCA Title VI, applicable from 30 December 2024). www.forvismazars.com
Binance.US delisting notice, 18 June 2025, listing “trading volume and liquidity” among the factors reviewed. support.binance.us
Flowdesk, “Current issues and solutions in crypto market making”, 10 January 2023, on the token-loan and call-option model. flowdesk.co

This note is general information from public sources, not investment, legal or tax advice. Market making carries market and exchange risk, which stays with the token project.