How to Choose a Crypto Market Maker in 2026: Questions to Ask Before You Sign
The due-diligence guide crypto founders wish they had before signing with the wrong market maker. Red flags, contract structures, and questions that reveal the truth.
Here is the thing nobody says out loud at the pitch stage: a bad market making arrangement can hurt your project more than simply launching with thin order books and no support at all.
When you have no market maker, the chart is honest. The spread is what it is. The order book is thin and everyone can see it. Sophisticated buyers who find your project will account for that. They've seen early-stage tokens before.
When you have the wrong market maker, the damage is less visible and far more corrosive.
Chart Damage
A market maker who disappears during volatility, who quotes artificially tight spreads only under calm conditions, or who executes poorly during high-volume periods creates candle patterns that look terrible. Irregular wicks, gap-down opens, sudden spread explosions — these aren't just aesthetic problems. Chart-reading retail traders and quant funds alike use order book depth and spread consistency as signals of token health. One week of erratic chart behavior from a bad MM setup can poison the data that algorithmic scanners use to flag a token as "worth watching" or "avoid."
More concretely: if you list on a mid-tier CEX and your market maker repeatedly fails to quote both sides during volatility, the exchange's own monitoring systems will notice. Exchanges track spread quality, quote fill rates, and book depth. A token that consistently underperforms on these metrics doesn't get recommended by the exchange's business development team for featured slots or promotional campaigns. You quietly get deprioritized. Nobody sends you a formal notice. Your token just stops getting exposure it would otherwise earn.
Community Panic
Your community is watching the chart. In 2026, even relatively unsophisticated holders have access to on-chain analytics, DEX screeners, and order book visualizations. When liquidity dries up and the spread widens sharply — especially right after a pump attempt or a news cycle — the narrative forms within minutes. Telegram and X communities do not wait for explanations. They pattern-match immediately: "spread widened, volume dropped, chart looks bad, something is wrong." You will spend real human hours firefighting perception damage that a competent market maker would have prevented entirely.
Exchange Relationship Risk
This point is almost never discussed in market making sales conversations. Your exchange relationship is an asset. The BD contact who got you listed, the growth manager who agreed to feature your token in a campaign — these relationships depend partly on your token performing like a legitimate, liquid market. Exchanges have finite shelf space in their promotional bandwidth. They allocate it based on performance data. A token that looks illiquid, that has poor fill rates, that generates support tickets from users complaining about slippage — that token gets quietly deprioritized. In some cases, especially on smaller exchanges with explicit performance requirements, poor liquidity metrics can trigger delisting reviews.
The wrong market maker doesn't just hurt your price. It damages infrastructure you'll need for the next 24 months.
The Three Types of Market Maker Agreements — and What Each Means for Your Treasury
Before you can evaluate a market maker, you need to understand the basic commercial structures they operate under. There are three main types. Most firms offer variations of all three.
Retainer Agreements
In a retainer agreement, you pay the market maker a fixed monthly fee — typically ranging from $5,000 to $50,000+ per month depending on the firm, the exchange, and the scope of services. In return, the firm commits to maintaining specified spread widths and book depth across specified exchanges during specified hours. Your tokens stay in your treasury. The firm uses their own capital (or capital they've raised) to provide liquidity.
The advantage: your token supply is not at risk. You know your monthly cost. You can budget for it.
The disadvantage: a pure retainer structure aligns the MM's incentives with their own risk management, not your token's success. If the retainer is flat regardless of performance, the firm has limited upside motivation to do anything beyond meeting the minimum contractual thresholds. You'll want robust SLAs if you go this route.
Loan-Option Agreements
This is the structure that has generated the most controversy — and the most damage — in the industry over the past four years. In a loan-option agreement, you loan the market maker a significant tranche of your token supply (often 3–10% of circulating supply or more). They provide liquidity using your tokens. At the end of the agreement term, they have the option — not the obligation — to return the tokens or pay the equivalent in cash at a strike price.
The conflict of interest here is severe. If the token price drops significantly below the strike price, the market maker has a financial incentive not to return tokens — they simply pay cash at the (lower) market rate and pocket the difference. In the worst-case scenario, a firm holding a large token loan can actually benefit from price suppression: they liquidate borrowed tokens into the market, driving the price down, then settle in cash at the depressed price. This is not a theoretical risk. Documented cases of this dynamic playing out have been reported in academic and industry research. The US SEC has also flagged certain loan-option market making structures in enforcement proceedings as potential securities manipulation schemes.[1]
Treat any loan-option agreement with extreme scrutiny. The default answer should be no unless you have ironclad protections built into the contract and independent legal review.
Hybrid Agreements
A hybrid structure combines elements of both: a smaller retainer fee alongside a token loan that is either smaller in size or structured with more protective terms (e.g., collateralization, capped liquidation rights, price floors on cash settlement). Done well, this can align incentives more cleanly — the firm has skin in the game via the loan, but the retainer ensures they're being compensated for operational work regardless of price direction.
Hybrid agreements require the most careful legal drafting. The details matter enormously. What's the strike price? What's the term? What are the liquidation restrictions? What triggers early termination? A hybrid with bad terms is just a loan-option with cover.
10 Questions to Ask Before You Sign
These are the ten questions every founder should ask any market maker before entering a commercial agreement. Don't accept vague answers. If the firm can't answer these clearly, that's the answer.
1. What are your exact spread commitments, and do they hold during high-volatility periods?
A good answer: A specific maximum spread percentage (e.g., "we commit to maintaining a spread no wider than 0.8% on Binance during normal market hours") with an explicit carve-out for extreme market conditions defined by objective criteria (e.g., "if the BTC/USD 1-hour move exceeds 5%, our obligation temporarily widens to 2%"). The carve-out should be narrow and clearly defined.
A red flag answer: "We'll do our best to keep spreads tight." Or: "Spreads depend on market conditions." These are non-commitments dressed up as answers. If the firm cannot give you a number, they are not committing to anything enforceable.
2. What happens to our token loan if your firm faces a liquidity crisis?
A good answer: An explanation of how client assets are segregated from firm operational capital, what custody arrangements exist, and whether there's a contractual mechanism for token return in the event of firm insolvency or restructuring.
A red flag answer: Deflection, vagueness about custody, or an assertion that "it's never happened to us." Counterparty risk is real. In 2022, multiple market making and lending firms collapsed suddenly, and clients with commingled assets had extremely limited recovery options.[2] Custody structure is not a paranoid question — it's a basic due diligence question.
3. Which exchanges will you provide liquidity on, and what's your existing relationship with each one?
A good answer: A specific list of exchanges with confirmation of existing API access, existing relationships with the exchange's market structure or listing team, and a track record of operating on those venues. Ask for verifiable examples — tokens they currently support on the same exchange.
A red flag answer: "We have connections at all major exchanges." This means nothing. API access takes time to establish. Some firms promise coverage on exchanges where they don't yet have infrastructure, planning to sort that out after you sign. Confirm existing access, not future access.
4. How do you generate revenue? Is any part of your revenue model in conflict with our token price going up?
A good answer: A clear explanation of their revenue model — retainer fees, spread capture, any performance bonuses — and an honest acknowledgment of where their incentives may diverge from yours, along with the contractual protections they have in place to prevent that divergence from causing harm.
A red flag answer: Any version of "our incentives are completely aligned with yours." That's not true for any commercial entity. What you're looking for is not perfect alignment — you're looking for honest disclosure of where conflicts exist and how they're managed. A firm that pretends there's no conflict is either naive or being dishonest.
5. What is your actual team size, and who are the people running our account day-to-day?
A good answer: Named individuals with verifiable backgrounds, clear role descriptions, and a point of contact you can actually reach in an emergency.
A red flag answer: "Our team" with no specifics. Some market making operations are run by two people with automated bots and minimal active oversight. That may be fine for stable, mature tokens. For a new listing in its first 90 days, you want humans who are watching and responding. Find out who they actually are.
6. What does your reporting look like — how often, what data, in what format?
A good answer: Regular reporting (at minimum weekly, ideally daily dashboards) on spread compliance, book depth, fill rates, and any incidents where commitments were temporarily suspended. Raw data access is a strong positive signal.
A red flag answer: Monthly summary reports with aggregated data and no access to underlying logs. Opaque reporting structures make it impossible to verify that the firm is delivering on its commitments. You need data, not summaries.
7. What happens if you underperform? What are the remedies in the contract?
A good answer: Explicit SLA breach definitions, a clear cure period (the time the firm has to fix the issue after being notified), and a meaningful remedy — whether that's fee credits, early termination rights, or partial token return.
A red flag answer: No SLA breach definition, remedies that are limited to "good faith discussions," or early termination clauses that require expensive notice periods (e.g., 90-day notice) that effectively trap you in a bad arrangement for months.
8. Can we speak to two current clients — not references you've pre-screened, but projects we identify from your public portfolio?
A good answer: Yes, with introductions provided within a reasonable timeframe.
A red flag answer: Deflection ("our clients are confidential"), offering only pre-approved references, or claiming they cannot share client information at all. If the firm has no verifiable public-facing client relationships you can independently investigate, be very cautious.
9. How do you handle the end of the agreement — specifically, how are loaned tokens returned?
A good answer: A precise term sheet explaining the return timeline, the settlement options (tokens vs. cash vs. a mix), the pricing mechanism used for cash settlement (e.g., 30-day VWAP vs. spot price on day of termination), and what happens if the firm cannot fulfill the return obligation.
A red flag answer: Vague language about "orderly wind-down" with no specific pricing mechanism or timeline. The end of the agreement is where a badly structured loan-option arrangement does the most damage. This section deserves a lawyer's attention, not just your own reading.
10. What are your compliance and regulatory standing in the jurisdictions where you operate?
A good answer: A clear description of what licenses they hold, what jurisdictions they operate in, and any ongoing regulatory inquiries. Firms that operate in regulated markets (e.g., EU under MiCA, registered money services businesses in the US) have at least some compliance infrastructure.
A red flag answer: "We operate in crypto, regulation doesn't apply to us" or evasive non-answers. As of 2026, the regulatory environment for market makers operating in token markets is materially clearer than it was three years ago. Firms that have invested in compliance are more stable long-term partners than firms that have not.[3]
Red Flags in the Contract
Even if the sales conversation goes well, the contract is where the real terms are decided. Here are the specific contract provisions that should make you stop and get independent legal review before signing.
Loan-Option Structures With No Price Floor
If the contract gives the market maker the right to return cash instead of tokens — which most loan-option agreements do — and does not specify a minimum settlement price or a price mechanism that prevents settlement below current market value, you are exposed. The market maker can wait until your token price is suppressed (potentially by their own liquidation activity) and settle at a deeply unfavorable price. Any loan-option agreement should specify a price floor below which cash settlement is not permitted, or require return of tokens in-kind rather than cash.
Spread Commitments That Disappear Under Volatility
Read the volatility carve-out language carefully. Some contracts define "extreme market conditions" so broadly that any significant price move suspends the firm's spread obligations entirely. If the carve-out applies any time BTC moves more than 2% in an hour, your market maker will be contractually excused from performing during most of the periods that actually matter. The carve-out should be narrow, objective, and time-limited (e.g., "obligations are suspended for a maximum of four hours following a qualifying market event").
Vague SLA Definitions
An SLA that says "we will maintain competitive spreads" is not an SLA. It is a sentiment. Enforceable SLAs require: a specific metric (e.g., spread width in basis points), a specific exchange and trading pair, a specific percentage of time during which the metric must be met (e.g., 95% of trading hours), and a specific definition of what constitutes a breach. If your contract does not contain all four elements for each venue, you have no enforceable performance standard.
Unilateral Liquidation Rights
Watch for language that gives the market maker the right to liquidate your loaned tokens "in their sole discretion" for risk management purposes. This provision can allow the firm to dump your tokens into the market at any time they feel their own position is at risk — without notice to you and without any price protection. This should be either removed entirely or replaced with strict notification requirements, liquidation pace limits, and your right to cure the situation (e.g., by posting additional collateral or repaying the loan).
Asymmetric Termination Rights
Some contracts give the market maker a short notice period to terminate (30 days) while requiring you to give a much longer notice period (90 days). This means if the relationship goes bad, you can be stuck with an underperforming firm for three months while they retain access to your token supply. Negotiate for equal or near-equal termination rights.
How to Evaluate Performance After Launch — KPIs to Track in the First 30 Days
Signing the agreement is not the end of the work. The first 30 days post-listing are the most important. Here's what you should be tracking.
Time-Weighted Average Spread (TWAS): Calculate the average spread on your primary venue across trading hours, weighted by time. Your market maker should be providing you with this data. If they aren't, pull it yourself from exchange order book snapshots. Compare against your contractual commitment.
Book Depth at ±1% and ±2%: How much USD liquidity is sitting in the order book within 1% and 2% of mid-price? This is what determines slippage for reasonably sized trades. Thin depth at these levels means real buyers and sellers are absorbing disproportionate price impact. Track this daily for the first month.
Spread Volatility: Don't just track average spread — track spread variance. A market maker who maintains a 0.5% spread 90% of the time but spikes to 8% during 10% of sessions is not actually providing stable liquidity. You want low variance, not just low average.
Fill Rate on Market Orders: How are market orders actually filling against the quoted spread? If fills are consistently at the ask when buying and at the bid when selling — and if those fills are happening within the quoted spread — your market maker is doing their job. If fills are consistently outside the quoted spread, either their quoting algorithm has a problem or the quotes are not real.
Incident Log Review: Every time the market maker's system paused, restarted, or deviated from standard quoting behavior, you should have a timestamped record. Review this log after the first 30 days. More than two or three unplanned incidents in the first month is a sign of infrastructure or process problems.
Community Sentiment Correlation: Track Telegram and X sentiment around price events. If you see community panic spikes correlating with times when your market maker should have been maintaining liquidity, that's a direct signal worth investigating against your spread and depth data.
What a Fair Market Making Agreement Looks Like
A fair agreement is not one that's maximally favorable to you. It's one where both parties have clearly defined obligations, the risk of each structure is honestly disclosed, and the remedies for non-performance are real and usable.
Specifically, a fair agreement includes: specific, measurable SLAs with objective breach definitions; a volatility carve-out that is narrow and time-limited; loan terms (if any) with in-kind return as the default, cash settlement only at VWAP-based pricing, and no unilateral liquidation rights; symmetric or near-symmetric termination rights; regular data reporting with raw log access on request; and a named account manager with a direct escalation path.
A fair agreement also prices the risk honestly. If a market maker is taking on significant risk by providing deep liquidity for a low-cap token on a volatile venue, they deserve to be compensated for that. Underpaying creates its own perverse incentives — the firm will quietly underperform rather than lose money on a bad deal. Market making is a business. A fair deal acknowledges that and builds a sustainable commercial relationship instead of trying to extract maximum output for minimum cost.
Work With a Market Maker Who Operates Transparently
If you're actively evaluating market making partners, BlockAI's market making service is built around the principles this guide covers: clear SLAs, honest disclosure of agreement structure, regular reporting, and a team you can actually reach when things get loud.
You can review the terms and get in touch at /market-making. If you've read this guide and have specific questions about your token's situation — exchange relationships, liquidity structure, existing agreement review — reach out directly. The first conversation is free and we won't pitch you on something that isn't the right fit.
Citations
[1] U.S. Securities and Exchange Commission. In the Matter of Hydrogen Technology Corporation and Tyler Ostern, Administrative Proceeding File No. 3-20453. SEC.gov, 2022. The SEC's findings in this case established precedent for treating certain market maker token loan arrangements as manipulative market practices under federal securities law.
[2] Contiguglia, C. and Allison, I. "How Genesis, Celsius, and Three Arrows Capital Collapsed — and What It Means for Crypto Custody." CoinDesk, 2023. Documented how commingled client asset structures at several large crypto financial firms led to near-total client losses during the 2022 insolvency wave.
[3] European Securities and Markets Authority (ESMA). Markets in Crypto-Assets Regulation (MiCA) — Guidance on Market Making Obligations, 2025. Under MiCA, entities providing market making services for crypto-assets in EU markets are subject to registration, conduct of business rules, and specific obligations around transparency of market making agreements — setting a compliance baseline that distinguishes legitimate firms from unregulated operators.