Why Are Market Makers Critical for Early-Stage Crypto Projects?

Launching a new cryptocurrency token is a high‑stakes moment for any Web3 startup. In 2024, the total number of cryptocurrencies exceeded 2.52 million, driven by an average of approximately 5,300 new tokens launched daily in the first quarter of the year, according to CoinGecko. Launching a token requires going through a very deep “Death Valley”: early-stage blockchain projects often face extreme price volatility, low trading liquidity, and fragile investor sentiment. There are few entities a startup can turn to in order to better their odds of success – a good market maker for crypto is one of them. 

Cryptocurrency market makers are specialized trading firms that continuously buy and sell assets to create a liquid market, one where tokens can be traded quickly without huge price swings. By actively managing order books and supplying liquidity, they help stabilize prices, tighten trading spreads, and instill confidence in early investors.

Now let's look at how crypto market makers contribute to the success of a token.

The Importance of a Market Maker for a Crypto Project

Freshly launched cryptocurrencies are particularly vulnerable to thin liquidity, wide bid-ask spreads, and sudden price swings – conditions that discourage sophisticated participants and long-term holders. As we mentioned, professional digital asset market makers address these vulnerabilities by actively managing the token’s order books, reducing slippage, and supporting smoother trade execution across exchanges.

As the need for crypto market makers now makes more sense, it is also important to understand their purpose more deeply and not to trust misconceptions about them. For instance, in reality, a cryptocurrency market maker does not have the power to dictate the token price. So what do these firms actually do for crypto projects? Let’s take a closer look.

Liquidity Depth Improvement

Liquidity depth refers to the number of buy and sell orders available at varying price levels. A deep order book is more resilient to large buy or sell orders, preventing price slippage and maintaining a stable market environment.

Bid-Ask Spread Reduction

One of the primary objectives of market making in crypto is to minimize the gap between the highest buying price (bid) and the lowest selling price (ask). Narrower spreads lower the entry and exit costs for all crypto market participants and improve trading efficiency. This also helps prevent erratic price action and supports more accurate technical analysis by traders.

Support for Listings

Market makers of crypto often assist Web3 projects in preparing for their first exchange listings by advising on optimal timing, sequencing, and positioning of their token. This includes helping projects understand listing requirements and creating the right conditions for a productive market launch.

Exchange Relationship Facilitation

Top market makers such as DWF Labs frequently maintain direct relationships with crypto exchanges. They can support listing negotiations, assist with technical integration, and, in some cases, help reduce the time involved in getting a token listed. Exchanges favor tokens that demonstrate sustainable trading activity. In contrast, projects that fail to maintain adequate liquidity eventually face delisting. Effective market making not only supports continued presence on existing crypto exchanges but also strengthens a project’s position when applying for new listings.

Volatility Control in the Short Term

By consistently quoting both buy and sell orders, market makers dampen short-term crypto price swings that may be triggered by one-sided order flow. This is essential for early-stage projects whose tokens are more prone to volatility due to limited natural liquidity. The best market maker aims to encourage organic participation in trading a crypto asset by creating a predictable, organic and trustworthy market structure. As more traders draw their attention to a token and engage in its trading, volume increases naturally, facilitating further demand.

Business Development Contribution

A token that trades with high volumes and narrow spreads thanks to a professional market maker appears more credible to potential business partners of the token issuer. Active secondary markets are often a prerequisite for forming integrations, collaborations, or institutional relationships with a blockchain project with its own crypto asset.

Broader Ecosystem Support

In addition to trading functions, some market makers contribute strategically to crypto project development. We at DWF Labs, for instance, offer a range of services beyond market making, acting as a crypto ecosystem builder. These services include:

• Access to a network of over 750 portfolio companies for potential partnerships.
• Media outreach via hundreds of outlets to amplify project visibility.
• Participation in grants, validator support, and hackathons, along with long-term operational backing during market downturns.
• Collaboration with academic and public institutions to support the development of Web3 infrastructure.
• Guidance on tokenomics, and early-stage incubation.
• Advisory input in areas such as marketing, target audience analysis, legal matters, and HR planning for selected projects.

Together, these contributions form a comprehensive support framework that extends far beyond liquidity provision. To gain an even deeper understanding,it is helpful to explore the common strategies that crypto market makers employ.

Case Study 

To reinforce the information above, let's examine a real case study of how market-making strategies work. 

An example of market making’s importance can be seen in the Hyperliquid (HYPE) token launch in late 2024. Hyperliquid, a decentralized finance protocol, conducted one of the largest token airdrops in history on 29 November 2024, distributing 310 million HYPE tokens, which were worth approximately $1.2 billion at the time, to its community. 

Typically, when a huge volume of tokens is unleashed in an airdrop, many recipients rush to sell, which can flood the market with supply and drive the price down. Yet, in this case, the HYPE token’s price surged by about 60% within 12 hours of launch. This outcome – a price increase despite a massive token unlock – was attributed in part to careful market management. The Hyperliquid team employed controlled distribution and managed order book pressure to mitigate extreme volatility.

Such examples highlight that behind every successful token launch, there is often an ‘invisible hand’ of a market maker working to balance the scales.

Conclusion

In a market saturated with thousands of new tokens and limited investor attention, crypto market makers serve as an essential force behind successful token launches and sustainable secondary markets. Their work enables projects to overcome early-stage challenges such as illiquidity, extreme volatility, and poor price discovery – factors that can otherwise undermine long-term growth.