Crypto market makers: what they do and how to choose one

Who decides this

The head of markets owns the choice of firm and the daily relationship with it. The CFO owns the economics: the tokens lent, any cash fee, any options granted and what they could cost at exit. Both answer to the board for one outcome: whether the token can be bought and sold in size on listing day and in the months after.

What should a market maker actually be hired to do?

A market maker should be hired to quote both sides of the book continuously, within a set spread and at a set size, on a named list of venues. Market maker Flowdesk describes the job as continuous buy and sell quoting that narrows spreads and keeps prices aligned across exchanges. Anything else is a different service, and in our view a worse one.

That definition rules out three things firms are sometimes asked for. The first is volume for its own sake. The October 2024 US case alleged that firms sold wash trading and volume generation to token companies for a fee.

The second is a target price. Flowdesk lists a firm guaranteeing that a token will reach a price as a red flag tied to possible manipulation. The third is “support” with no definition. Liquidity is measured in the order book, not in a partnership announcement.

We would write the mandate as one paragraph before speaking to any firm: venues, pairs, maximum spread, depth per side, uptime and the reporting you expect. That paragraph becomes the comparison grid for proposals. Later it becomes the schedule to the contract, as set out in our guide to the depth, spread and uptime commitments to require.

Which pay model fits the treasury: loan-and-option or retainer?

Choose loan-and-option when the treasury is short of stablecoins and can accept giving up some upside; choose a retainer when you can fund both sides of the book and want control. The two models move capital risk, control and cost in opposite directions.

Under the option model, Arrakis reports that many projects now lend 2–5% of their token supply to market makers. Tokenomist notes that the firm’s largest potential return then usually comes from the options, not from quoting. That is why the obligations must be measurable: pay does not depend on quote quality.

A retainer ties pay to service. Tokenomist observes that the monthly cash cost is why early teams often avoid it, and that most retainers still need working inventory or a funded account. For a funded organization, the test is the treasury. If the stablecoin side of the book can come from the raise, a retainer is cleaner. If not, take the loan model and negotiate the options as a real cost.

Do not compare quotes on the fee line alone. Tokenomist’s worked comparison sets a 40 basis point spread across five venues with 98% uptime against an 80 basis point spread on two venues with no uptime commitment. The second quote is a smaller job, not a cheaper price. Hold venues, spread, depth and uptime constant, then compare.

How should you check a firm before you sign?

Check a market maker as you would any counterparty that will hold treasury assets, because under a loan it does. Ask for the legal entity that will sign, its AML and KYB process, its venue list and a sample report. Flowdesk lists missing AML and KYB processes as a red flag.

Then check how the firm behaves at listing, not only what it promises. In March 2025, Binance said it had offboarded a market maker that, a day after a token listed, placed sell orders for 66 million tokens with only small buy orders. Binance said the firm made about $38 million and that it had told the project’s teams about the irregularities. A project can hire a firm and still carry the reputational cost of its conduct.

Read the US enforcement record with care. The October 2024 charges came from the Justice Department, with parallel SEC civil complaints, and they are allegations; defendants are presumed innocent. As of that announcement, four defendants had pleaded guilty, a fifth had agreed to, and more than $25 million in crypto had been seized. Ask every candidate in writing whether it sells volume services. A vague answer is an answer.

Arrakis lists further patterns worth asking about directly. They include selling loaned tokens to build the quote side and buying back lower, placing bids to draw in other traders and then pulling them, and discounted tokens offered as a kickback for bidding at listing.

One firm, or room for a second?

Appoint one firm if you must, but never sign away the right to add a second. Tokenomist flags exclusivity clauses as a hidden cost because they can block a second firm later. A single firm also becomes a single point of failure on listing day.

Venue drift is the other reason. A token that lists on new exchanges after signing is not automatically covered by the first agreement, Tokenomist notes. Either the contract has a process to add venues, or the second venue goes unquoted.

Keep the first term short. Tokenomist reports that initial terms of 6 to 12 months are common and that the issuer should have the shorter notice period. A short first term with a measured review point lets you renew on evidence rather than on a relationship. The structure and clauses are covered in our guide to market maker contracts: loan-plus-option vs. retainer.

Can you verify that the firm is doing the work?

You can, if the contract says who measures and against what data. Tokenomist recommends a right to independent verification against a third-party data source, because otherwise the firm’s own report is the only record. Order-book data is observable, so this is practical.

Ask for one more number. Tokenomist suggests comparing the depth a firm posts with the capital it was lent. A low ratio means loaned tokens are sitting idle while the firm still holds the options.

Agree the report before you sign, not after the first dispute. Flowdesk suggests asking for live dashboards or regular reports on trading activity, depth, spreads, market share and PnL, and treats a lack of transparency as a red flag. We would also fix how often the report arrives, which data source it uses and who at the firm stands behind it.

The same discipline applies to conflicts. Flowdesk’s own list of questions for a market maker covers how it handles conflicts of interest and how it stays compliant across the jurisdictions it trades in. Ask both, in writing, and keep the answers with the contract.

What goes wrong: a launch plan that assumed liquidity

The launch plan lists the exchanges, the date and the expected price. Liquidity appears as one line: “market maker engaged.” Nobody wrote down what the book should look like in the first hour.

Then the token lists. The firm’s obligations were never numeric, so a thin bid is technically compliant. The treasury has set no stablecoins aside, because the loan model meant none seemed needed. The first time the head of markets sees order-book data from outside the firm is when holders post screenshots of it.

The fix is sequence. Write the quoting mandate before choosing the firm. Put the numbers in the contract with a measurement method and a remedy. Make sure someone other than the market maker watches the book from the first minute of trading.

How Alcyone approaches it

Alcyone treats the market maker as part of the launch plan with a named owner, not a vendor signed in the last week. Through Alcyone’s business development and partnerships advisory, its partners introduce issuers to exchanges and market makers and review market-making contracts alongside listing agreements. The partners have helped launch 80+ projects through the TrustSwap Launchpad, and clients are under no obligation to use TrustSwap products.