How Market Making Will Help You Gain Traction For Your ICO Token

Do you know why many successful ICO projects fail? The reason behind the failure is the lack of token liquidity. Even if you are successful in selling the tokens and raising funds, you need to make sure the tokens gain traction. And it can only happen if there is liquidity in the market for your tokens.

This doesn’t happen naturally as ICO tokens lack liquidity. You have to take some extra steps and put in extra effort to generate liquidity in order to gain traction for your token.

Most ICO project owners appoint market makers for this process. You can approach various companies for ICO Development Services. They will help you in selecting good market makers for your project.

Do you know who market makers are? If yes, you might know how important a role they play in creating liquidity in the market. If no, we can guide you. In this post, we will discuss about market making and show you how it will help you gain traction for your ICO token. So let’s begin.

Market making is a process in which the company hires market makers to create liquidity for their tokens in the crypto market. They create liquidity by trading the tokens in the market. They create a tight spread to increase liquidity. In this process, the market makers will buy a token at a lower price and sell at a slightly higher price to maintain spread. Spread = Ask price (selling price) – Bid price (buying price). The disparity betwixt the bid price and the asking price is the spread. Liquidity increases when the spread is tight, i.e., less difference. The market makers earn a profit on the spread.

Market makers are the ones who are involved in the market making process. There are many professional market makers who help to increase the token liquidity in the market. They will make a market for your token to perform. You can choose a good market maker for your ICO token. They usually charge fees for their service. Although they are involved in buying and selling tokens, they are not investors.

Mr. A launched an ICO and appointed Market Makers B to create liquidity for the token. The current rate of the token is 50. Now the market maker B will quote a bid price of 45 and ask price of 55 for the same token. They will but the token for 45 and sell it for 55, thereby making a profit of 10. The spread will be 10. 

They will continue this way to increase the liquidity by the tight spread. When the spread is tight, the volume of trade will increase, creating more liquidity and making the token a hit in the market.

Here we will show you how market-making helps to solve your ICO token’s liquidity issues and helps it to gain traction. Here are the benefits of market-making.

• Increased Liquidity:

As we have discussed above, the main advantage of market making is increased liquidity of token. If you appoint market makers, they will provide the token liquidity to the investors. This will help you gain more investors and increase more liquidity for your token in the market.

• Liquidity lures more investors:

When the spread is tight, there is a lesser risk. New investors are risk-averse; they will never invest in tokens with larger spreads. When the spread is tight, new investors will be attracted to the token. Your token will gain the attention of institutional investors. They are a sophisticated group of investors. These investors are healthy for your token. They will bring a certain reputation to your token.

• Liquidity cycle:

Once marketing making increases the liquidity for your token in the market, it will start a liquidity cycle. The token liquidity will bring more entries in the order book. This will further increase the liquidity for investors. Once the number of investors increases, the trading volume will increase. 

When there is a high trading volume, market makers will get involved for free. They make huge profits on trading volumes. This will help you negotiate with exchanges. You will get more power to launch another ICO project. So once the market makers start the liquidity cycle, the liquidity will remain in the market, even without paying the market makers.

• Token price increases:

When more and more people start investing in your token, the demand for your token will increase. And with higher demand, the price of the token will increase. It will increase the value of the token in the market. It will also increase the token trading volume. With an increase in volume, the profit will increase, which will further increase the demand for the token.

• Token becomes more popular:

As new investors, as well as institutional investors, will start investing in the token, it will become popular. Your token will soon become a brand with a loyal group of investors. Healthy investors always bring brand value.

• Exchange listing becomes easier:

Now that your ICO token is popular in the market, you will get an added advantage with the exchange. As your credibility is proved, you can now easily negotiate with the exchange for another listing. By looking at the success of your previous token, exchanges will become liberal and charge fewer fees. You can now easily list another token with the exchange by avoiding strict compliance.

• ICO project reputation:

Your token represents your company. So if your ICO token becomes famous, it will naturally bring popularity to your ICO project and company. Investors will recognize your company. It will become a brand. The reputation of your ICO project, as well as your company, will improve.

Market making is an important part of an ICO project. So if you are planning to launch an ICO project, don’t forget to look for good market makers to make your token successful.

You can appoint an ICO development company to launch an ICO project. They are professionals. They use ICO Software Development to develop token for your project as well as help you with the market-making process to make your token desirable for the investors. 

They have tie-ups with professional market makers, which can help in increasing token liquidity. This way, you don’t have to worry about the performance of your token in the secondary market.