How market makers like SpotSpreads help keep trade afloat on Binance, Coinbase, WazirX, CoinDCX
Started by Keshav Saraogi and Shraddha Agarwal, Singapore-headquartered SpotSpreads creates liquid markets for a number of Indian and international crypto exchanges. Here’s how:
If you’ve made a transaction on Binance or Coinbase, it's possible that you would have used an order book comprising buy or sell orders.
Let’s say you want to swap your Tether (USDT) for Bitcoin (BTC) on a centralised exchange. You would execute your transaction from an order book for USDT-BTC, which comprises several existing buy or sell orders at various prices close to the overall price of the asset.
This order book usually represents liquidity or the availability of that particular pair in an exchange like Binance or Coinbase.
A healthy, well-functioning market is one where users can tap into this liquidity to make quick trades without notably affecting the asset’s price and its stability. Naturally, liquidity cannot exist on its own—it needs to be provided by individuals or organisations known as market makers.
Indian entrepreneurs Keshav Saraogi and Shraddha Agarwal run one such market-making service, known as , for various leading crypto exchanges around the world.
SpotSpreads works with crypto exchanges and other Web3 entities to create liquid markets by deploying proprietary algorithmic trading and high frequency execution capabilities.
“Based on the latest data of trades, we have our strategies to determine the buy and sell limit orders to be placed," said Shraddha Agarwal. “At SpotSpreads, we sign contracts with exchanges to provide liquidity, and have our strategies running continuously on them, with the lowest latency possible, to get the best rate limits.”
It has integrated with and deploys capital (in varying volumes based on market conditions) with Binance, Coinbase, Uniswap, Kucoin, OKX, dYdX, Crypto.com, WazirX, CoinDCX, Bybit, Coinswitch Kuber, Sushiswap, Huobi, and more.
In fact, the startup and its founders (in their own capacity as well as with SpotSpreads) claim to have already facilitated cumulative trading volumes of over $20 billion for these exchanges across over 200 token pairs.
It was also recently selected in the first cohort of Telangana state’s Web3 incubator programme.
How SpotSpreads works
When the end user wants to make a transaction, they can see several limit orders placed by others, one of whom could be a market maker like SpotSpreads. End users and other institutions could also place orders and provide liquidity, but without a contract in place, they are under no obligation to do the same.
It is tasked by the exchanges to continuously provide liquidity at fair prices and maintain a healthy market.
Without such a service, certain token pairs could face low liquidity, high volatility, and as is usually the case, a combination of both.
Saraogi told The Decrypting Story, “We intend that the prices at which users transact are as close to the fair price as possible. We don’t want there to be a big disparity between the price of the same token on different exchanges.”
“So we place orders across buy and sell sides, and across exchanges. If there isn’t much of a price difference for the same token across exchanges, it means we are successfully fulfilling our market-making operations.”
Market makers play an important role in providing liquidity for both buyers and sellers in financial markets, and their role is even more crucial in crypto because this digital asset class is historically known for its high volatility.
In simple terms, crypto market makers like SpotSpreads buy crypto from sellers and sell it to buyers. This way, they facilitate trade, and make sure there’s always someone on the other end of a trade.
Some of the leading global crypto market makers include GSR and Wintermute, with traditional quantitative trading firms like Jane Street also expanding into crypto market making.
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Plans for growth
Besides market making, Singapore-headquartered SpotSpreads also offers over-the-counter (OTC) services for crypto, as well as advisory and venture capital services.
And since SpotSpreads is bootstrapped, all the capital the co-founders have deployed so far has been in their own capacity. This was true even before SpotSpreads when they traded individually with their own funds.
Now, the startup is looking to raise capital from investors to deploy across Indian and international crypto exchanges.
“We are also working on extending our capabilities to decentralised exchanges after seeing the impact of a collapse of a major centralised exchange last year,” Saraogi said, referring to the FTX bankruptcy.
The startup also intends to increase its focus on its OTC and venture capital services, among other plans.
To go after its plans, SpotSpreads will also look to hire and grow its business development, finance, admin, and other related teams.
“So far, we’ve focussed mostly on tech. We have around 12 members now…going forward, we want to grow to add another 5-6 members across other functions,” said Saraogi.
Edited by Akanksha Sarma