Okay, let's be real. Crypto. It’s not intended to be unregulated—it’s supposed to be the opposite, it’s supposed to be about freedom, about breaking free from the centralized power’s clutches. Whenever something goes wrong in the crypto space, the loudest voices are the ones screaming about manipulation and control. Ironically, most of these biggest critics completely misread the key tenets that allow a free market to thrive.
They are the true titans of today’s financial universe. They’re vilified, but they serve as the grease in the gears, providing an indispensable function for an efficient, decentralized financial system. Think of them like the road maintenance crew patrolling the crypto highway. They do it all while filling in potholes along the way and managing traffic to keep you out of a DeFi destruction derby.
Liquidity: The Oxygen Of Crypto Markets
Now imagine trying to sell that same altcoin on an exchange where no one is buying or selling. You're stuck. Over time your order just sits there, collecting digital dust, as the price fluctuates widely. That's a market without liquidity. And a market void of liquidity is a moribund market.
In the crypto world, it’s market makers—firms like GSR or B2C2—who provide that liquidity. They keep a constant post of bid and ask prices. They’re prepared to purchase at the time you want to divest and first in line to sell when you wish to acquire. They don't care which way the market's going; they're just there to facilitate the trade, taking a tiny spread as their fee. Since they take a neutral market position, they are not in the business of pumping or dumping an asset.
It's not sexy. It's not revolutionary. But it is fundamental. But without market makers, crypto would probably still be the Wild West. It would be a speculative, scam-ridden free-for-all where only the largest whales would survive.
Regulation: Friend or Foe of Freedom?
Now, I know what some of you are thinking: "Aidan, isn't this just another form of centralized control? Aren't market makers rigging the game?"
That’s where my inner libertarian starts getting upset. Regulation, though well-intentioned, can quickly turn into a weapon used by the institutions crypto is aiming to bust up. Instead overregulation stifles innovation, empowers centralized authorities and regulators and ultimately hurts the average user. Consider South Africa’s FSCA, for instance. While intended to protect consumers, excessive regulatory burdens can inadvertently shut out smaller players and consolidate power in the hands of a few large, well-connected firms.
One of the beauties of market makers is that they trade in a completely competitive space. If one major shady market maker becomes a liability, the others will replace him. That enforcement lies in the market itself, a far more efficient check and balance than any regulatory regime imposed from the top down.
Think of it like this: Is a farmer manipulating the price of wheat when they plant and harvest? No. They're providing a service, meeting a demand. Market makers have been up to this exact activity in the digital space.
Plus, let’s get rid of the bone-headed idea that market makers are all crooks. No doubt there are bad apples — just as in any other industry. But the overwhelming majority of market makers are just honest businessmen trying to make a buck, providing a generally useful service. They're not trying to control the market; they're trying to facilitate it.
Volatility Down, Adoption Up
Bitcoin's volatility has plummeted, from a dizzying 80-90% in 2017-2018 to under 50% in early 2024. That's a massive drop. It’s not by accident that volatility has fallen so much. This sudden disappearance is perhaps the most advantageous coincidence with the rise of market makers and institutional adoption of crypto.
Why? Because reducing volatility increases crypto’s appeal to both individual and institutional investors. By lowering the risk, it makes it much simpler to program and advance complex investments. And that, in turn, means more capital flowing into the crypto space, fueling further innovation and growth.
The recent approval of Bitcoin ETFs in the US is yet another example of the crypto market now coming into its own. In addition, these ETFs would simply not function without the underlying liquidity and stability provided by constant underlying price arbitrageurs, aka market makers.
Sub-Saharan Africa, a region that has been at the forefront of crypto’s early adoption, knows this all too well. They’re making sure that nobody’s waiting for permission, they’re pumping danger into the system, and they’re building the future of finance, one transaction at a time.
So, the next time you hear someone bashing market makers, remember this: they're not the enemy. They are the silent (and sometimes not so silent) heroes of decentralized finance. These guys are some of the unsung heroes that have worked to make crypto usable, safe, and decentralized. What they—indeed, all of them—transformed was the crypto market. What used to be a splintered and erratic market has since become a calm, orderly, and appealing landscape for retail and institutional investors alike. Let's give them the credit they deserve. As such, without them the dream of a truly decentralized and open financial system would be just that — a dream.
