Delta Neutral Utopia of Crypto Market Making

It’s been 6months since I joined a MM firm. I’ll try to sum up my lessons learned. Beside all the technical aspects of it, it’s really refreshing to be a part of a team where you combine your brain power in a way that 1+1=3. And if along the hard work you can also joke around with friends it is a dream come true. But let’s get to the important stuff.

Trading engine

One of the parts of a backbone of successful MM is a reliable trading engine. With peolpe responsible only for that you can focus on developing models and improving other parts of the system.

Diversification

Either diversification by a range of strategies that you run or number of coins/exchanges you animate, but also diversification in time (HFT way). It really help to reduce net exposure and gain those pennies in front of a steamroller.

Inventory

Even if your trading is market neutral you can express your view on the broad market by managing overall exposure. Sometimes it can provide a nice buffer to net PnL from strict MM part of the business. Or maybe it can be a bulk of it. At some point you start to think if we are still a MM firm or a normal prop shop.

This is only the tip of the iceberg of running a successful market making firm. But it’s a nice seagway to start. I’ll elaborate soon, hopefully.