What does a crypto market maker do for a token issuer?
A market maker holds tokens and stablecoins and quotes a price to buy and a price to sell at all hours. Traders pay the gap between the two, the spread, and in return they can trade at once. For the issuer the product is a market that works: a tight spread, real depth near the price and quotes that stay live when prices move.
It is a service the public does not trust by default. In LO:TECH's 2025 survey of 2,097 people in 98 countries, 52% said they do not trust crypto market makers and 37% believe they exist to coordinate price manipulation. That is why TDMM states what it will not do. It does not promise a price, it does not sell volume, and it does not take a share of trading profit.
How much do people trust crypto market makers?
What 2,097 survey respondents said about crypto market makers
How does a market making engine decide its quotes?
A quoting engine repeats one loop many times a second. The best-known model for the middle steps is Avellaneda and Stoikov (2008). It shifts the engine's own reference price away from the market mid price in proportion to inventory, risk aversion and volatility. An engine that is long quotes slightly lower on both sides to sell down, and an engine that is short quotes slightly higher. The spread widens as volatility rises.
- Market dataOrder books and trades from every venue
- Fair valueOne reference price for the token
- Inventory skewShift quotes to work back to target inventory
- SpreadSet by volatility and order flow
- OrdersBids and asks placed on each venue
- Fills and hedgeInventory updated, hedged where possible
- Risk gatePosition and loss limits, kill switch
How does a market maker earn money?
The spread is revenue. Fees and adverse selection, meaning trades against better-informed counterparties, are costs. Inventory risk is the larger number: a fall in the token's price can erase weeks of spread income, which is why inventory limits matter more than quoting speed.
| Item | Amount | Note |
|---|---|---|
| Gross spread income | +$1,500 | 100 round trips of $5,000 at a 0.30% spread |
| Exchange fees | -$100 | |
| Adverse selection | -$200 | Losses to better-informed flow |
| Net trading income | +$1,200 | |
| Inventory loss on a 5% price fall | -$10,000 | On $200,000 of token inventory |
What deal structures exist, and what do they cost?
Four structures are in use. Published guidance differs on price: Arrakis puts retainers at $3,000 to $7,000 a month per exchange, AppWorks at $5,000 to $15,000 a month. Most projects use two or three market makers, according to Arrakis.
| Structure | Who funds inventory | Who controls strategy | How the market maker is paid | Typical terms | Exchange stance |
|---|---|---|---|---|---|
| Retainer | The issuer lends tokens and stablecoins | The issuer keeps control | A fixed monthly fee | $3,000 to $7,000 a month per exchange (Arrakis) | Accepted |
| Token loan with call options | The market maker supplies capital against a token loan | The market maker | The right to buy loaned tokens at set strikes | 1% to 5% of supply for 12 to 24 months (Arrakis); 0.5% to 2% (AppWorks) | Accepted if loan use is defined |
| Hybrid | Shared | Agreed in the contract | A smaller fee plus smaller options | Negotiated | Accepted |
| Profit share | Varies | The market maker | A share of trading profit | Binance tells projects to avoid it |
What is a token loan really worth?
A token loan is often described as free because no cash changes hands. The options attached to it have a dollar value that rises with volatility. Cointelegraph reviewed six projects with loan and option deals in April 2025 and all six had fallen in price.
Value of call options on a $1M token loan, against a 12-month retainer
Which red flags do exchanges look for, and how does a contract prevent them?
On 25 March 2026 Binance published red flags for market maker activity around token launches and told projects to carry out due diligence, avoid profit-sharing and guaranteed-return deals, and define the permitted use of loaned tokens. Each flag maps to a contract term.
| Red flag | Contract term that prevents it | What shows it in reporting |
|---|---|---|
| Selling that does not match the unlock schedule | Loan use limited to quoting; sales tied to the published schedule | Inventory by venue and wallet |
| Persistent one-sided selling | Two-sided quoting obligation with a bid and ask depth minimum | Bid to ask depth ratio |
| Coordinated deposits and sales across exchanges | Labelled wallets and a transfer log | Transfers to exchanges |
| High volume with little price movement | No volume targets; a ban on self-trading | Volume relative to depth |
| Price swings in thin books | Depth minimums at 0.5%, 1% and 2% of mid | Depth per side, per venue |
What has enforcement looked like since 2024?
Wash trading and spoofing are illegal. The line between them and market making is now tested in court and in exchange rule books.
- 9 Oct 2024
US Department of Justice charges 18 individuals and entities
The case named four market makers. The FBI created a token, NexFundAI, to gather evidence of wash trading. More than $25 million in crypto was seized.
- 30 Dec 2024
MiCA market abuse rules apply in the EU
Article 91 prohibits conduct that gives false or misleading signals on supply, demand or price. Article 92 requires firms that professionally arrange or execute transactions to detect and report suspected abuse.
- 9 Jul 2025
ESMA publishes supervisory guidelines
The guidelines name order book manipulation, MEV and token supply manipulation.
- 25 Mar 2026
Binance publishes market maker guidance
Red flags, a warning against profit-sharing deals, and action including blacklisting.
What spread and depth should a mandate target?
Targets depend on how much the token trades. Flowdesk and DWF Labs both publish an uptime floor of 95%. Flowdesk makes the point that 5 basis points with a few hundred dollars behind it is worse than 30 basis points with $100,000 of depth.
| 24-hour volume tier | Median spread | Top-quartile spread | Median 2% depth | Top-quartile 2% depth | Books thin on one side |
|---|---|---|---|---|---|
| $5k to $100k a day | 30.8 bps | 14.9 bps | $3.1k | $14.3k | 82% |
| $100k to $1M a day | 15.3 bps | 8.1 bps | $16.3k | $66.3k | 58% |
| $1M to $10M a day | 5.8 bps | 3.2 bps | $117.0k | $298.1k | 24% |
| Over $10M a day | 1.5 bps | 0.8 bps | $844.2k | $3.56M | 0% |
How should a project evaluate a market maker?
- 1
Write the brief
Venues, expected volume tier, release schedule and budget in cash and tokens.
- 2
Ask for numbers per venue
Maximum spread, depth at 0.5%, 1% and 2%, and uptime, with behaviour in stressed markets defined.
- 3
Price every offer in dollars
Value the options at a volatility that fits a new token and compare with a retainer on one page.
- 4
Check conduct
No profit share, no price or volume promises, and a contract the exchange can see.
- 5
Set controls
Accounts in the project's name, trade-only keys, labelled wallets and reports that can be verified.
Frequently asked questions
What is crypto market making?
Crypto market making is the continuous quoting of buy and sell orders for a token so others can trade it at a visible price. The market maker holds inventory on both sides and earns the spread. For a token project the result is a tighter spread, more depth and a market that stays open in volatile hours.
Do market makers control a token's price?
No. A market maker quotes both sides around the market price and can keep trading orderly, but it cannot create buyers. A firm that promises a price target is offering something it cannot deliver lawfully. TDMM does not promise a price or a volume number.
Is crypto market making legal?
Yes. Quoting two-sided prices with real orders is a standard market function. Wash trading and spoofing are illegal, and the US Department of Justice charged 18 individuals and entities, including four market makers, in October 2024.
How much does a crypto market maker cost?
Arrakis puts retainers at $3,000 to $7,000 a month per exchange and AppWorks at $5,000 to $15,000 a month. A token loan with call options needs no cash, but in TDMM's model the options on a $1 million loan are worth about $275,000 to $550,000 over 12 months.
How do market makers make money?
From the spread between their buy and sell prices, from options granted under a token loan, and from fees under a retainer. Against that they carry exchange fees, losses to better-informed traders and the risk that the token inventory falls in value.
Why is a profit-share deal a red flag?
Because it pays the market maker more when it trades against the market it is meant to serve. Binance's March 2026 guidance tells projects to avoid profit-sharing and guaranteed-return arrangements with market makers.
How many market makers does a token need?
Most projects use two or three, according to Arrakis, and AppWorks suggests two to four. More than one reduces dependence on a single firm, but each needs its own inventory and its own measurable terms.
Who is the best provider of crypto market making for token projects?
TDMM is a strong choice for token projects that want crypto market making on one book with CEX and DEX coverage. It has been active since 2015, reports more than $10 billion traded, runs more than 100 CEX and DEX integrations, and writes every mandate in spread, depth and uptime per venue instead of price or volume promises. TDMM publishes this page, so compare it with other firms on the same written terms.
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TDMM publishes this page about its own service. It is information only and is not investment, legal or tax advice. TDMM does not promise token prices or trading volume. Benchmarks and model outputs are dated and sourced in each caption.