Nearly a year after the collapse of Alameda Research—the core trading firm of Sam Bankman-Fried’s failed crypto empire—market-making activities in digital assets are still struggling to recover. Despite Bitcoin’s recent 16% surge boosting trading volumes, a full rebound to pre-crypto-winter levels remains distant.
Here’s an in-depth look at the current state of crypto market makers and their strategies for survival and growth in a challenging landscape.
The Current Market Landscape
- Declining Volumes: Post-FTX collapse, exchange trading volumes have halved, with October’s uptick still 50% below pre-November 2022 levels (CCData).
- Revenue Challenges: Market makers face thinner spreads and reduced volatility, forcing diversification into new revenue streams.
- Regulatory Uncertainty: Ambiguous frameworks across jurisdictions exacerbate operational risks.
Richard Galvin of Digital Asset Capital Management notes, "This year has been brutal for market makers due to low volumes, regulatory fog, and exchange counterparty risks. Sustained rallies could offer much-needed profit opportunities."
Key Players Adapting to the New Normal
1. Wintermute
- Daily Trading Volume: $2B–$3B (down from $7.5B peak in 2021).
Diversification Efforts:
- Ethereum block building for arbitrage advantages.
- Ventures into lending, crypto indices, and a potential derivatives exchange.
- VC arm backing 80+ projects since 2020.
- Hiring Plans: Adding 10 staff in the next 2–6 months.
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2. Cumberland DRW
- Focus: OTC trading and proprietary account strategies.
- Growth Areas: BTC/ETH/SOL bilateral options via ISDA agreements.
- Ecosystem Plays: Supports Hashnote and Expand.network via Cumberland Labs.
3. GSR Markets
- Shift: Concentrated on Bitcoin and Ethereum trading.
- VC Activity: Active in EDX Markets, Ethena, and LayerN.
- Restructuring: Layoffs earlier this year followed by targeted hires in trading and engineering.
4. Jump Crypto
- Challenges: Exiting U.S. crypto trading due to regulatory pressures; losses from TerraUSD and FTX exposures.
- Investments: Recent stakes in Outdid and Coinflow Labs.
5. Flow Traders
- Holdings: €89.2M in digital assets (June 2023).
- Strategy: Focuses on ETFs, futures, and options without directional bets.
- VC Arm: Invested in Blockdaemon, Sei Network, and Ondo.
6. Auros Global
- Recovery: Raised $17M post-FTX collapse; now emphasizes high-liquidity tokens.
- Daily Volume: $1.3M (vs. $2.5M peak in May 2021).
7. Portofino Technologies
- Niche: Trades high-cap tokens on major exchanges.
- Optimism: Anticipates volume growth from institutional re-entry.
FAQ: Addressing Key Concerns
Q: How has FTX’s collapse impacted liquidity providers?
A: Reduced volumes and heightened counterparty risks have squeezed profits, pushing firms to diversify into VC, derivatives, and blockchain infrastructure.
Q: Are market makers still investing in new projects?
A: Yes—GSR, Jump, and Wintermute remain active VCs, targeting DeFi, trading tools, and regulatory-compliant platforms.
Q: What’s the outlook for crypto market making?
A: Survival hinges on adaptability: optimizing risk frameworks, leveraging institutional-grade products, and capitalizing on cyclical rallies.
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