Crypto Market Making Compared With Equities Market Making

Crypto market making shares equities market making's core logic but adds continuous trading and real exchange counterparty risk.

Crypto market making and equities market making share the same core objective, capturing the bid-ask spread while managing inventory risk, but the underlying markets differ enough in structure that a strategy built for equities cannot be transplanted directly. Crypto trades 24 hours a day with no scheduled close, liquidity is fragmented across dozens of venues with meaningfully different risk profiles, and counterparty risk is a live, first-order concern in a way it is not for a market maker quoting on a regulated equities exchange.

Equities markets open and close at fixed times, with an opening auction that establishes a starting price and a closing auction that many market makers use to flatten inventory at a single, liquid reference price. Crypto markets run continuously, with no equivalent structural reset, which means a market maker in crypto has to manage inventory around the clock or accept overnight and weekend risk that an equities market maker largely avoids by closing flat each evening.

This continuous structure also means volatility events, a large news announcement or a cascading liquidation, can happen at any hour, including times when staffing and risk oversight would typically be lighter on a traditional desk, which pushes crypto market making firms toward heavily automated risk controls rather than relying on a human trader to intervene quickly.

Equities in a given country generally trade on a small number of regulated, centrally cleared exchanges where counterparty risk is largely absorbed by a clearing house. Crypto trades across dozens of exchanges with widely varying levels of solvency, custody practice and regulatory oversight, and a market maker holding balances on multiple venues to provide liquidity everywhere is directly exposed to any one of those venues failing, freezing withdrawals, or being hacked.

The collapse of FTX in November 2022 was the clearest demonstration of this risk: market makers with capital held on the exchange lost access to it, and the event forced a broad reassessment across the industry of how much capital any single venue should be trusted with, pushing many firms toward more active balance management across venues rather than parking large reserves on any one platform.