Nearly a year has passed since the downfall of Alameda Research, the trading firm at the heart of Sam Bankman-Fried’s crypto empire.
Now deemed guilty of fraud, the incident has left market makers in digital assets struggling to rebound.
Trading volumes have seen a rise with the recent surge, as Bitcoin soared by nearly 16%. Yet, the journey to pre-crypto winter levels remains long.
Data reveals the first increase in trading this month since June. Still, the figures are half of what they were before FTX‘s fall in November 2022.
The remaining liquidity providers profit from the buy-sell price difference. They now face the challenging task of generating revenue in a market lacking both volatility and volume.
Some have shifted their trading strategies. Others are exploring new revenue streams beyond market making.
“It’s been a tough year for market makers,” noted Richard Galvin of Digital Asset Capital Management. Low volumes, regulatory uncertainty, and exchange risks have been concerning.
The recent rally, if sustained, may enhance profit opportunities for active market makers and traders, he added.
Let’s look at recent actions from some active market-making firms:
Wintermute
Wintermute Trading, a leading crypto-native market maker, stays profitable. The co-founder, Evgeny Gaevoy, shared in an interview that they are gearing up for a potential market upswing.
The firm’s daily transactions have dipped from $7.5 billion at the market’s peak to between $2 and $3 billion. Marina Gurevich, COO, provided these figures.
Wintermute is also making strides in Ethereum’s network, looking to bundle transaction blocks for competitive advantage.
This approach seeks to boost earnings from arbitrage and other opportunities.
They’re backing a yet-to-launch lending project, considering a crypto derivatives exchange, and developing a crypto-related index.
Investment details remain under wraps. But the firm’s investment arm has supported over 80 projects since 2020.
Planning for growth, Wintermute aims to expand its team by up to 10 people within the next six months.
GSR Markets
GSR, established by former Goldman Sachs traders in 2013, has grown into a principal market maker in crypto.
Recently, it gained approval from Singapore’s central bank to offer digital token payment services.
The firm is focusing more on Bitcoin and Ethereum, as per reports to Bloomberg.
GSR Investments, their active investment branch, remains among the top ten most engaged managers in the sector.
After a slow summer, their VC activity picked up this quarter.
Staff reductions occurred this year, a common trend in the current market climate. However, GSR is hiring for roles in trading, engineering, legal, and finance.
Jump Crypto
Jump Trading launched Jump Crypto in late 2015 to dive into digital assets.
U.S. regulatory uncertainties have led Jump to pull back from crypto trading in the States.
Despite setbacks, including losses from the FTX incident, Jump Crypto has bounced back and continues to invest in crypto projects.
Flow Traders
Flow Traders, a market maker in various traditional asset classes since 2017, has a conservative growth approach.
Their crypto arm saw minimal impact from FTX’s demise and remains committed to bolstering the digital asset ecosystem.
The firm anticipates ongoing regulatory uncertainty but engages with authorities for a clear, fair framework.
Flow Traders deals in spot, futures, options, and ETFs in digital assets. They recently launched a venture capital unit, Flow Traders Capital.
Auros
Auros, with offices in New York and Hong Kong, froze around $20 million in FTX, leading to restructuring efforts.
They’ve since raised $17 million, aiding their recovery from the FTX event.
Auros has refined its exchange exposure and risk management, now targeting highly liquid, high-value tokens.
In summary, these firms are navigating a complex landscape with innovative strategies to thrive post-FTX turmoil.