Liquidity and market makers are essential for the healthy functioning of stock and crypto exchanges. In crypto in particular, market makers play a significant role in helping projects kickstart their liquidity, get exposure to investors, and list on exchanges.
What Is Wintermute?
Wintermute is a leading global algorithmic market maker and High-Frequency Trading (HFT) firm for digital assets like cryptocurrencies. Wintermute helps create liquid and efficient markets on centralized and decentralized trading platforms. In total, Wintermute has partnered with over 50 exchanges and trading platforms.
Wintermute also acts as a gateway of support for high-profile blockchain projects and traditional financial institutions looking to move into crypto. Wintermute manages hundreds of millions in assets and trades more than $5 billion+ a day.
Wintermute’s main goal and role are to create reliable liquidity projects and to help markets run more efficiently.
A unique feature of Wintermute is they’re not a regular market maker, but rather a high-frequency market maker in the crypto space. This means Wintermute’s algorithmic and business model is different from market makers that specialize in OTC, dark pools, and execution services.
Who Owns Wintermute?
Wintermute was founded by Evgeny Gaevoy, who has over 10 years of experience in capital markets and financial services at companies like Optiver. In particular, Evgeny is the former Head of ETF market-making at Optiver. Therefore, he has extensive experience in the market-making space which can be extremely beneficial for crypto.
Wintermute is a technology company and not a financial service or trading company. Hence, they’re a private limited company and not a hedge fund. Therefore, their ownership structure and incentive mechanisms are different from traditional and other crypto hedge funds.
What Does Wintermute Do?
Wintermute’s vision is to become the number one algorithmic liquidity provider in both centralized and decentralized finance worlds across all liquidity pools such as on-screen, OTC, spot, and derivatives. In particular, with the goal of solving the two biggest obstacles in crypto – lack of liquidity and inefficient markets.
Wintermute has four services – market making, OTC, NODE, and ventures.
1 Market Making
Wintermute’s market-making service entails partnering with promising projects to help them improve liquidity. This also includes supporting major exchanges (centralized and decentralized), trading pairs, and other crypto trading platforms. Their support work includes working with ambitious crypto projects individually and helping them get listed. In addition, Wintermute offers these projects guidance on all aspects of liquidity such as off-exchange trades and token bridging.
Wintermute’s OTC service provides spot and derivatives trading for over 250 digital assets. They provide these services to clients such as funds, brokers, family offices, blockchain projects, OTC desks, institutions, and qualified individuals.
Wintermute NODE is a professional OTC trading platform for institutions and qualified individual investors. NODE is essentially Wintermute’s trading engine.
Wintermute Ventures is the company’s investment arm that’s dedicated to supporting innovation in the blockchain ecosystem. Here they aim to kickstart project liquidity, product testing, market making for listed tokens, supporting OTC and treasury management, and co-building and advising.
Some projects that Wintermute has invested in include Polygon, Ethereum, zkSync, Optimism, dYdX, Serum, 1inch, Zerion, Aave, and Lido.
How Does Wintermute Make Money?
As a market maker, Wintermute profits from trading volumes such as high-volume products like Bitcoin and other top-rated cryptocurrencies. In particular, market makers like Wintermute make money by receiving the market spread on various crypto trades. The spread is the difference between the buy and sell prices that traders submit.
For example, if a seller asks to sell a stock at $103 and a buyer bids to pay $97 for that stock, the $6 difference goes to the market maker.
Moreover, the spreads differ on a market’s liquidity. Thus, market makers will less likely to provide liquidity to low-volume markets because of the risks and lack of demand for the asset.
In this case, market makers will make money by engaging in paid contractual agreements with exchanges to provide liquidity to these markets. Also, market makers will receive significantly reduced trading fees or no trading fees altogether. This is the second-way market makers like Wintermute make money.
Is Wintermute Regulated?
Wintermute is a registered firm, but they’re not authorized or regulated by any regulatory authority. This means that any party trading with Wintermute may not benefit from the protections that are typically provided when trading with regulated entities.
However, Wintermute is registered with the Financial Conduct Authority (FCA) as a Cryptoasset firm and hence complies with Money Laundering, Terrorist Financing, and Transfer for Funds Regulations 2017 as amended.