Farewell to the Wild Era: Crypto Market Makers Embrace Their "Coming of Age"
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Farewell to the Wild Era: Crypto Market Makers Embrace Their "Coming of Age"
The life-and-death game of crypto market makers is akin to a process of species evolution in extreme environments.
Navigating Web3 tides with focused insightsWritten by: Ada, TechFlow
In the court of public opinion surrounding cryptocurrency, market makers seem to perpetually occupy the top of the food chain. They are viewed as "system-level winners" alongside exchanges, imagined by outsiders as "pumps" that reap profits from every market fluctuation without bearing directional risk.
However, when you truly step into this industry, a different, harsher reality emerges: some face overnight liquidation during extreme market conditions; others exit quietly after a single risk management failure; and many more, squeezed by halved profits, ineffective price wars, and a scarcity of quality assets, are forced to completely restructure their entire business models.
The life of a crypto market maker is far less glamorous than imagined.
Over the past two years, the industry has undergone a quiet yet brutal cleansing. As exorbitant profits recede and regulations tighten, compliance capabilities, risk control systems, and technological foundations have replaced the former reliance on boldness and gray-area operations, becoming the new survival thresholds. This is no longer a game of "who dares, wins," but more akin to a long-term, professional, low-error-tolerance survival race.
In-depth interviews with several leading market makers reveal a highly consistent judgment: today's crypto market makers are no longer merely "liquidity providers"; they are evolving into a hybrid form of "secondary market investors + risk managers + infrastructure providers."
As the tide recedes, competition returns to rationality, and risks are fully exposed, who is leaving the table? And who gets to stay in the game?
From "Wild West Arbitrage" to "Highly Institutionalized"
If we turn back the clock to 2017, "crypto market makers" in the modern sense barely existed.
Market making back then resembled a carnival of gray-area arbitrage. Borrowing tokens, dumping, buying back, returning tokens... dumping chips during periods of ample liquidity and slowly accumulating during long-tail phases. The boundaries between exchanges, project teams, and market makers were extremely blurred. Operations considered serious crimes in traditional finance, such as price manipulation and wash trading, were commonplace.
But time is ruthlessly淘汰 this model.
The consensus judgment from multiple interviewees is that market makers in 2017 relied on guts and information asymmetry; today's market makers rely on systems, risk control, and compliance.
The core of the change is not merely an "upgrade in tactics," but a fundamental shift in the industry's underlying structure. In the past, whether a market maker "played by the rules" might have been a moral choice; now, it is a red line determining survival.
Joseph, Investment Partner at Klein Labs, reveals that all their current operations must revolve around "auditability." Standardized contracts, financial audits, detailed transaction records, and delivery reports have shifted from "optional" to "default settings." Consequently, compliance costs now account for 30% to 50% of total operating expenses.
As exchange compliance processes accelerate, project financing paths become more transparent, and regulatory narratives go mainstream, the survival logic of market makers is forced to be reconstructed. The former wild-west model of "black-box operations + results-oriented" is being systematically淘汰.
A clear signal is that more and more market makers are beginning to incorporate "Regulation First" into their brand narratives, no longer avoiding the topic.
The transformation of their role is equally profound. In the wild-west era, market makers were merely executors; project teams provided capital and tokens, and market makers were responsible for placing orders. Today, market makers resemble secondary partners.
"Whether we take on a project has become a question akin to an investment decision. The project's fundamentals, circulation structure, exchange configuration, and volatility range are all quantitatively assessed in advance," says Joseph. "Projects with a market cap outside the top 1000 might not even qualify for discussion."
The reason is simple. A single劣质 project can devour a market maker's entire annual risk budget. In this sense, market making is no longer a simple "service fee business," but a long-term博弈围绕 risk exposure.
Of course, wild-west arbitrage hasn't completely vanished, but it has been marginalized.
In the industry's darker corners, high-risk, high-gray-area operations still exist, but the difficulty of scaling them is increasing daily, and their生存空间 is being compressed to the limit. When exchanges, project teams, and market sentiment collectively prefer "stable liquidity," players who don't play by the rules themselves become systemic risks.
In today's crypto market making landscape, "playing by the rules" has, for the first time, transformed from a moral constraint into a core competitive advantage.
Exorbitant Profits Are Disappearing
Compared to the last bull market, project teams' budget allocations for market makers have significantly shrunk. "Data shows that the token budgets provided by some projects this year have even decreased by 50% compared to the last cycle," points out Vicent, Chief Information Officer of Kronos Labs.
But this isn't just a matter of "budget cuts"; a deeper driving force comes from the evolution of the client's (project team's) mindset.
Project teams' understanding of market making services has greatly improved. They are beginning to understand market makers' profit margins, no longer satisfied with vague promises of liquidity. Instead, they demand quantifiable KPIs, clear delivery logic, and in-depth explanations for the efficiency of every fund's use.
In short, less money, higher demands.
Facing this pressure, leading market makers have not blindly plunged into price wars. Vicent emphasizes that market making is an industry heavy on systems, risk control, and experience. Once pricing falls below the cost of covering risks, market makers face not just declining profits, but a survival crisis. Therefore, when the risk-reward ratio becomes unbalanced, they prefer to walk away.
This means the market hasn't been彻底击穿 by "low-price players"; instead, it has筛选出了一批 survivors who坚守底线.
A current phenomenon is: quality clients are scarce, and long-tail projects are unprofitable.
Reele from ATH-Labs states: "The number of projects truly possessing market making value is far less than the number of market makers in the market." A large number of long-tail projects, due to insufficient depth or being easily arbitraged, struggle to generate sustainable profits even if they meet market making metrics.
This leads to a classic "more monks than粥" situation: leading market makers cluster around quality projects, while small and medium-sized teams can only内卷 in marginal projects with meager profits and extremely high risks.
Against this backdrop, market making services are degenerating from a pure "profit center" to a "relationship entry point." Many market makers view market making as a敲门砖 to secure long-term cooperation,借此切入 project teams' Treasury management, OTC trading, structured products, and even as a starting point to become secondary market advisors or asset managers.
In other words, the real profits are increasingly not in the "market making fees," but in the后续结构中. This also explains why many still-active market makers are simultaneously expanding business lines like investment, asset management, and advisory services. They are not转型, but rather seeking "续命空间" for a core business that has already been compressed.
Industry Reshaping: The Splitting of the Table
In the last cycle, competition among market makers primarily occurred at the same table—the same exchanges, the same product forms, the same liquidity metrics.
This year, that table is being split.
The emergence of new tracks like on-chain market making, derivatives, and stock tokenization is systematically altering the competitive landscape for market makers.
On the narrative level, on-chain market making is often labeled as "open, decentralized." But on the practical level, its barriers have not decreased but increased. The uncertainty of real liquidity, limitations of the execution environment, and the常态化 nature of smart contract risks make it a completely different capability curve, not a case of降维打击.
Compared to on-chain market making, derivatives market making exhibits opposite characteristics. Its entry barriers are high, but once established, the moat is extremely deep.
In derivatives market making, futures markets impose极端 strict requirements on risk control and position management. This naturally favors institutional market makers with larger capital规模, richer risk control experience, and more mature systems. On this track, new players aren't without opportunities, but the error tolerance is极低.
As for stock tokenization, while seen as a key narrative connecting to traditional finance, it remains in its early stages from a market making perspective. Its core难点 lies in the complexity of hedging and settlement structures, leading most market makers to maintain an attitude of "research first, cautious participation."
In other words, this is a track with极高 potential but尚未形成 a stable market making model.
In Reele's view, these new market making tracks are not only reshaping the industry structure but are also a source of pressure for their innovation. Although the client pool has shrunk, they must still adapt to the层出不穷 new玩法 in the market within a short time and provide project teams with better market making strategies.
"The market maker industry is transitioning from a 'unified market' to a structured ecosystem of 'multiple parallel tracks.' Competition among market makers is shifting from 'homogeneous内卷' to capability differentiation across tracks," Reele states.
The Moat of Crypto Market Makers
As exorbitant profits recede, roles shift forward, and tracks differentiate, a reality becomes increasingly clear: competition among market makers is no longer about "who is more aggressive," but about "who is less likely to make mistakes."
At this stage, what truly creates a gap is not a single advantage, but an entire set of system capabilities that are difficult to replicate.
These system capabilities include stable trading systems, strict risk control frameworks, powerful research capabilities, compliance and auditability, all of which共同筑起 the trust system of crypto market makers.
Joseph透露 that the信用成本和合规成本 incurred in building this trust system constitute the largest current expense. Although the crypto market maker industry is already a fully competitive market, newcomers may not necessarily be more experienced than established players in building consensus and reputation, as well as in应对风险.
The crypto market大清洗 on October 11, 2025, serves as validation. Vicent indicates that this event reflected how the transmission speed of leverage and liquidation far outpaces traditional risk control reaction mechanisms; the industry is accelerating its分化, teams with insufficient infrastructure and risk control capabilities will be淘汰, and the market will evolve towards greater concentration and institutionalization.
"Market making today is already a systems engineering discipline. Those who can truly stay for the long term are not teams that躲过一次风险, but teams that assume from the outset that a清洗 will inevitably occur and prepare accordingly," Vicent says.
Overall, the true moat of a market maker lies in being "less likely to make fatal mistakes" across multiple critical nodes. This leads the industry to a seemingly counterintuitive result: the most successful market makers are the most restrained, most institutionalized, and most systematic ones.
As the market enters a new stage of full competition and risk institutionalization, crypto market makers are no longer "marginal arbitrageurs," but indispensable yet highly constrained foundational roles within the crypto financial system.
Their survival logic is approaching that of traditional finance infinitely, operating with the precision of Wall Street's high-frequency trading giants, yet situated within a "dark forest" that operates 7x24 without休市 and exhibits volatility ten times that of the Nasdaq.
This is not merely a回归 to traditional finance, but a species evolution in an extreme environment.
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