A market maker is a party that continuously quotes both buy and sell prices to keep a market liquid and spreads tight. On a token launch the role is filled by a professional trading desk on centralized venues or by protocol-owned liquidity in an AMM, and usually by both.
Most serious launches use both an AMM pool and a professional desk; the plan must say which markets each covers and when the desk goes live relative to TGE.
How it works
A market maker simultaneously quotes a bid and an ask and stands ready to transact at those prices, refreshing them continuously so others can trade without waiting for a natural counterparty.
Professional crypto desks usually operate on a loan agreement: the project lends the desk tokens and base currency, the desk quotes continuous two-sided markets and earns the spread, then returns the loaned assets at the end. Spread obligations, minimum quote sizes, uptime commitments, and loan terms vary widely and are negotiated commercially.
How we approach it
The AMM pool provides always-on, permissionless liquidity for DEX traders. The professional desk provides tighter spreads on centralized venues, absorbs OTC-scale block trades, and manages directional exposure more actively than a passive pool.
A token listing on a major CEX the same day as its DEX IDO needs the desk active before the CEX listing opens, because that order book has no depth without it. A DEX-only token can rely on AMM liquidity for the initial weeks and add CEX market making later, at the cost of wider spreads and lower institutional access early on.
Common mistake
Teams sign a market maker agreement too late, sometimes days before TGE, leaving no time to test the desk's quoting or renegotiate unfavorable terms. The agreement should be in place and operational at least two to four weeks before TGE.
See Token Launch Strategy for how this applies in practice.
More in Launch and Markets
- Token generation event (TGE)
- TGE float
- Effective sellable float
- Initial coin offering (ICO)
- Initial DEX offering (IDO)
- Initial exchange offering (IEO)
- Decentralized exchange (DEX)
- Automated market maker (AMM)
- Liquidity pool
- Concentrated liquidity (V3) versus constant-product (V2)
- Liquidity depth
- Slippage
- Price impact
- Buy pressure
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