Launching an exchange is easy; building healthy liquidity is not. Effective market making for crypto exchanges is the difference between a dormant order book and a platform that attracts traders, grows volume, and withstands volatility. In this guide, we unpack the strategies, controls, and incentives that actually work for new exchanges—whether you run spot, derivatives, or hybrid venues.
Who this is for: B2B founders, PSPs, banks, brokerages, and fintechs evaluating white-label exchange stacks and liquidity partnerships.
Table of Contents
Why Market Making Matters for New Exchanges
In a two-sided marketplace, the first traders judge your venue by spread, depth, and fill quality. Practical market making for crypto exchanges creates tight spreads, deep size across top-of-book levels, and stable quoting during volatility—signals that professional takers (and retail flow) can trust.
Macro tailwinds are favorable. Global user adoption is broadening, with India and the U.S. leading grassroots and institutional activity in 2025, expanding potential order flow for well-run venues. (Chainalysis) At the same time, market structure analytics show improving market depth and spread stability across top pairs, indicating sophisticated liquidity is back after prior drawdowns—good conditions for new entrants with the right playbook. (Kaiko Research)
Core KPIs Your Liquidity Strategy Must Hit
To make market making for crypto exchanges measurable, align on KPIs from day one:
- Quoted Spread (bps): Median and 95th percentile at size X (e.g., 1k/5k/10k USDT).
- Top-of-Book Depth: Cumulative size within ±10 bps and ±50 bps. Kaiko frequently benchmarks these metrics to compare venue quality across pairs. (Kaiko Research)
- Order Book Imbalance: Ratio of bid to ask liquidity; aim for balance ≤ 1.2x in calm regimes.
- Fill Slippage: VWAP vs. mid-price for standard notional clips (e.g., 2k/10k/50k).
- Quote Presence: % time with two-sided quotes at target sizes.
- Inventory Turnover & Carry: Net inventory risk cost vs. maker-rebate revenue.
- Uptime During Vol Events: Quote presence and spread discipline during ±2% one-minute moves.
Order Book vs. AMM: Choosing the Right Microstructure
Order books remain the default for centralized venues. They enable granular control of price steps, queue priority, and maker/taker economics—where maker orders add liquidity and usually pay lower fees, while taker orders remove liquidity and pay higher fees. (Bitpanda)
AMMs (Automated Market Makers) can complement illiquid long-tail pairs or power hybrid books (virtual order books) where AMM curves supply baseline depth and the engine converts AMM quotes into limit orders. For new exchanges, a hybrid approach—order book for majors, AMM-assisted for tails—often delivers the best early-liquidity experience.
9 Winning Strategies for Market Making
Below are the field-tested tactics we deploy when advising on market making for crypto exchanges. Use them modularly; your venue may need 5–6 to hit KPI thresholds in the first 90 days.
1) Anchor Pairs First, Then Expand
Start with 6–10 anchor markets (BTC, ETH, popular stables, 1–3 regionals) and hit spread/depth SLAs before listing aggressively. Wider catalogs without depth dilute trust and fragment liquidity. Coordinate go-to-market so marketing focuses demand on these anchors for compounding network effects.
Execution tips:
- Offer maker rebates and volume-tiered fees on anchors only, then roll to additional pairs.
- Mirror symbol conventions and tick sizes used by top venues to lower trader friction.
2) Mirror Liquidity from Reference Venues—But Don’t Chase
For price discovery, peg quoting bands to composite mid (e.g., VWAP across Tier-1 venues) with guardrails for cross-exchange latency. Use a latency-aware band (e.g., ±X bps from composite) and inventory-aware skew so you don’t blindly follow temporary dislocations.
Execution tips:
- Consume depth feeds + trades from multiple venues; smooth with Kalman/EMA filters.
- Enforce circuit breakers: if composite deviates beyond threshold, switch to inventory-driven quoting.
3) Inventory-Aware Skewing
Quote tighter on the side you want to unwind; widen on the side you need to accumulate. Maintain target inventory bands per asset (e.g., ±0.5–1.0 day’s average notional). Automate skew factors to reduce human latency and minimize overnight risk.
4) Volatility-Adaptive Spread Control
Tie your maker spread to short-horizon volatility (e.g., 30-second realized vol). When vol doubles, spreads widen mechanically; when vol compresses, tighten to win queue priority. This keeps market making for crypto exchanges resilient during news shocks while preserving profitability.
5) Smart Hedging: Cross-Venue & Derivatives
Offset net exposure via perpetuals/futures on liquid venues or through correlated assets (e.g., hedge alt/BTC beta). Netting exposure centrally reduces balance sheet usage and supports aggressive quoting without ballooning VaR.
Execution tips:
- Define hedge ladders (thresholds that trigger partial hedges) to avoid over-hedging noise.
- Consider basis and funding costs in carry P/L, especially during regime shifts.
6) Liquidity Rebates with Objective SLAs
Move away from generic fee holidays. Incentivize makers against verifiable SLAs: quote presence ≥ 98%, spread ≤ N bps at size X, and depth targets by time-of-day. Pay performance-based rebates and reduce them if SLAs aren’t met.
Why it works: Makers internalize reliability, not just volume. This is essential market making for crypto exchanges that seek institutional credibility.
7) Cross-Listing with Institutional LPs
For early stages, partner with 1–3 established liquidity providers (LPs) with proven uptime, then supplement with internal PMM (proprietary market making) for pairs strategic to your brand. Negotiate rights for primary listings or co-marketing to route first-day flows.
8) AMM-Backstopped Long-Tail Markets
Use an AMM backstop for thin pairs to avoid empty books. Translate AMM quotes into resting limit orders with minimum depth per tick. Introduce dynamic fees (wider when volatility spikes) to protect LPs from impermanent loss while keeping minimal tradability.
9) Data-Driven Listing & Sunsetting Policy
Apply quantitative listing criteria: telegram/twitter DAU, on-chain holders, DEX volume, and correlation to your anchors. If a market fails spread/depth KPIs for 30 days, sunset or AMM-only it. This keeps market making for crypto exchanges focused on sustainable liquidity, not vanity tickers.
Risk Management & Compliance Controls
Robust controls are non-negotiable:
- Segregated Roles: LP connectivity separate from risk and treasury ops.
- Kill Switches: Per-pair and global; trip on missed heartbeats, stale quotes, or runaway hedges.
- Inventory Limits: Hard/soft caps by asset and venue; automated throttles kick in before limits.
- Abuse & Wash-Trade Prevention: Surveillance for self-matching, circular trades, and spoofing; flag patterns to compliance for review.
- Counterparty Risk: Concentration caps per LP/venue; diversify routing.
- KYC/AML Alignment: Screening for market abuse signals and sanctioned entities; adapt to jurisdictional rules as you expand (e.g., UK e-money rails and EU investment firm permissions continue to shape fiat on/off-ramps and liquidity programs). (F N London)
Fraud and market integrity matter commercially too: rising sophistication of crypto scams increases the cost of poor controls and reputational risk for venues that don’t police flow effectively. (Reuters)
Incentive Design: Fees, Rebates, and Liquidity Mining
Maker/Taker: The classic model remains effective: makers add liquidity and often pay lower or negative fees (rebates); takers remove liquidity and typically pay more. (Bitpanda)
Design levers you control:
- Rebates by SLA tier: Pay more when makers meet depth/uptime goals.
- Volume tiers with decays: Monthly lookback with weekly decay to reward consistency.
- Targeted campaigns: Temporary fee reductions on new pairs to bootstrap depth.
- Referral routing for institutional takers to specific markets with guaranteed spread SLAs.
Liquidity mining (order-book variant): Issue venue credits or stable rewards to makers who meet KPIs (not just volume). Keep programs time-boxed, with cliffs and performance audits. Ensure tokens—if used—have non-voting or limited governance rights to avoid regulatory complexity.
Operational Playbook: 30/60/90-Day Liquidity Plan
Day 0–30: Establish the Core
- Onboard 1–3 external LPs + internal PMM.
- Launch 6–10 anchor pairs; set conservative spread bands and inventory limits.
- Publish transparent market quality dashboard (spread, depth, uptime).
- Offer maker rebate of up to X bps on anchors tied to quote presence SLA.
Day 31–60: Tighten & Expand
- Introduce vol-adaptive spreads; reduce anchors’ median spread by 20–30%.
- Add 4–6 new pairs with AMM backstop.
- Roll out fee tiers + SLA rebates; start taker referral program for OTC desks and brokers.
Day 61–90: Institutionalize
- Add futures/perp hedging for majors; implement centralized netting.
- Begin prime-broker style credit lines for selected market makers with strict limits.
- Sunset 10% worst-performing pairs or switch to AMM-only.
- Conduct liquidity war-game: simulate a ±10% single-minute move; audit quote presence and hedging latency.
Build vs. Partner: White-Label Liquidity Options
You can build an in-house PMM desk, onboard third-party LPs, or adopt a white-label stack that integrates both.
- In-house PMM: Maximum control and brand-aligned execution logic; requires quants, SREs, and 24/7 coverage.
- External LPs/Primes: Faster depth, diversified flow sources; less control over quote style and behavior.
- White-Label Exchange + Payments: Fastest route to market with enterprise-grade infrastructure, integrated fiat rails, risk tooling, and market making for crypto exchanges presets you can tune.
If you want to launch your own branded crypto platform in days, not months, explore our enterprise stack: Crypto White Label Platform.
Technical Checklist: Matching Engine to Monitoring
Matching Engine
- Deterministic matching; configurable price/time/priority.
- Micro-batching and cancel/replace optimizations.
- Self-match prevention and cross-trade checks.
Connectivity
- Redundant LP gateways; FIX/WS/REST with heartbeat and throttles.
- Market data normalization (L2/L3), composite mids, and latency metrics.
Quoting Logic
- Volatility-adaptive spreads; inventory skew; composite-aware bands.
- AMM adapter for tails; quote throttles during stale market states.
Hedging
- Multi-venue router; derivatives hedge support (perps/futures).
- Central netting with carry awareness (funding, basis).
Risk & Compliance
- Hard limits; per-pair kill switches; alerts to Slack/SIEM.
- Surveillance for spoofing/wash activity; sanction screening.
Observability
- Real-time dashboards for spread, depth, slippage, and uptime.
- Replay tools for incident response.
Case for Timing: Why 2025 Is a Window
Market structure data indicates recovered depth and tighter spreads across top pairs versus prior years, creating favorable conditions for entrants who can deliver reliable books and compliant rails. (Kaiko Research) Meanwhile, broad global adoption means more potential order flow for venues that localize listings and payments. (Chainalysis)
Examples: Pricing & Maker/Taker Structure
To operationalize market making for crypto exchanges, consider:
- Anchors (BTC/ETH/USDT):
- Maker: −1 to 0 bps (rebate) if SLA met; Taker: 6–10 bps.
- Depth SLA: ≥ $250k within ±10 bps; ≥ $1m within ±50 bps during peak hours.
- Regionals/Mids:
- Maker: 0–2 bps; Taker: 10–16 bps.
- Depth SLA: ≥ $50k within ±20 bps.
- Long-Tail/AMM-backed:
- Dynamic fee bands; AMM inversion protection during volatility.
(For a primer on maker-taker dynamics you can share with your ops team, see accessible explainers from reputable academies.) (Bitpanda)
Go-to-Market: Liquidity Meets Payments
Great market making fails without frictionless fiat rails. Combine order-book quality with enterprise payments:
- Multi-currency settlement (GBP/EUR/USD) for takers and market makers.
- Automated reconciliation and instant payouts to reduce LP float.
- Compliance by design: KYC/AML pipelines that won’t break during high-volume days.
To enable international treasury flows and payouts at scale, explore our International Payments Gateway.
Governance: Transparent Rules and Fair Access
Institutional LPs prioritize predictable rulebooks:
- Publish transparent fee schedules and eligibility tiers.
- Document API rate limits, latency budgets, and cancel/replace rules.
- Offer sandbox environments for strategy testing.
- Enforce neutral access—no hidden queue advantages or privileged last-look.
KPIs to Report Publicly (Build Trust Fast)
Within 30 days, publish a weekly Market Quality Report that includes:
- Median spread and depth by pair and session (Asia/EU/US).
- Quote presence and uptime by LP.
- Slippage benchmarks for standard order sizes.
- Incident post-mortems (if any) and remediation actions.
Public transparency attracts sophisticated takers and strengthens your flywheel.
Final Thoughts & Next Steps
Sustainable market making for crypto exchanges is equal parts microstructure design, risk discipline, and incentive engineering. Start with anchors, enforce SLA-based rebates, backstop tails with AMMs, and centralize hedging. Publish your rulebook and market quality transparently. In 90 days, you’ll move from empty books to a credible venue that institutions will test—and stay.
- Ready to accelerate? Visit Crypto White Label to see how our enterprise stack compresses time-to-liquidity.
- To launch your own branded crypto platform in days, not months, contact our solutions team for a personalized demo.
- Scale global collections and payouts with our International Payments solution.
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