Helios Liquidity — Sustaining The Next Chapter of Cryptocurrency Growth
How Greed and Deceptive Practices Destroyed the Crypto Market, and How We’re Fixing it
The cryptocurrency market is currently facing a liquidity crisis that few people realise, and even fewer are talking about. With rampant wash trading, fake volume, and unsubstantiated hype, we have seen significant price declines across the board.
Let’s be clear: this is not a “bear market”, this is a greed-induced death-spiral from which the majority of tokens will never recover. The surviving minority of tokens will be those that deliver genuine value, genuine liquidity, and genuine utility.
It is not difficult to find assets with daily trading volumes ostensibly in the hundreds of thousands of dollars per day, in which it is simply impossible for real traders to actually buy and sell the asset. We have the many so-called ‘market makers’ to thank for this, hired by often short-sighted ICO founders, who inflate volumes through wash trading and other dubious, deceptive, manipulative, and ultimately self-defeating practices. In the long-term, this is detrimental to token prices, to investors, and to the creators of the tokens themselves. The lack of real liquidity this results in causes a multitude of problems: it prevents inward investment, undermines organic growth, and reduces the likelihood of blockchain adoption. All of this, in part, is due to the misguided use of volume instead of liquidity depth as a metric for liquidity or investor interest. We believe the metrics currently used will inevitably change as sentiment shifts, as the market gradually realises that current practices are self-defeating and failing to deliver value. To read more on our thoughts regarding volume, liquidity depth, check out an earlier article by our co-founder, Lewis.
I realise all of this paints a pretty bleak picture of the current state of the cryptocurrency market; fortunately, there is a solution. The market is in dire need of genuine market makers, charging reasonable fees, who create genuine depth of liquidity. So what is the solution? What can the founders of a cryptocurrency do to ensure they’re in the minority that will thrive now that the bubble has burst?
First and foremost, founders must ensure their token has liquidity depth. Not volume, not wash trading, not hype and not sprawling banners on Coinmarketcap. You do not need volume to enter and exit large positions, you need liquidity depth. You need a healthy order-book that can meet buy pressure and sell pressure while minimising slippage and creating price stability. This is not new knowledge, it has been the standard practice in equity markets since 1626, when the first shrewd market makers created liquidity for the trading of Dutch East India company shares. There are over two thousand recognised market makers operating in US markets today, and we have them to thank for the relative stability and small spreads witnessed in the stock market.
Unfortunately, when we talk about market makers in the cryptocurrency industry, we’re often not talking about creating liquidity to support the ebb-and-flow of supply-and-demand, we’re talking about what effectively amounts to fraud. Before I describe what sets Helios Liquidity apart, and makes us truly unique, let’s look at a brief example of the liquidity crisis that I have alluded to, looking at a relatively young asset, CARD. (I must stress this is not an example unique to Cardstack, it is rampant throughout the industry, this is simply a convenient example)
We can see that CARD has a 24 hour volume of over $200,000 — around 3% of the market cap. Conventional wisdom would suggest this is a relatively liquid market, serving the needs of most investors. But things are not as they seem. Take a look at the Liquidity Depth on their largest market, Coinsuper.
What does the depth chart above tell us? Firstly, we can see a 24h volume of 85866494 CARD, equating to approximately 1167 ETH, or US $250,000. That surely means there’s lot of trading and a healthy order-book, right? Wrong! There is not a single seller on the book. There are bids amounting to $64. If there are no orders on the book, and you’re an investor either looking to buy or sell, there are really no viable solutions. So where does this quarter of a million dollars of volume come from then? I will allow you to come to your own conclusions on that.
We have seen the effect of low quality and deceptive Market Makers, not just in the example above, but across the industry as a whole. It would not be an exaggeration to say the majority of losses incurred this year are a result of such practices.
So what’s the remedy?
Helios Liquidity was formed in collaboration with Sharpe Capital, to further our goal of making markets fairer, more accessible, and more robust. We developed our own proprietary Market Making algorithms that produce the healthiest possible order-book, ensuring liquidity depth on both the buy and sell side at all times. These algorithms not only support price stability and enable inward investment, but they generate profit — profit that we share with our clients.
Having a background in traditional markets, we understand the steps required to achieve wider adoption of digital assets. Our algorithms have been developed by our outstanding team of engineering PhDs, mathematicians and experienced market analysts who have worked in both cryptocurrency and equity markets.
Our singular goal is to help the market mature in the way that allows cryptocurrencies and decentralized technology to prosper. We are true believers in decentralisation — and we frankly find the recent evolution of the sector somewhat disheartening. In a nut-shell, we’re not happy with the current state of affairs, so we’re changing them.
Now that we’ve established the importance of creating persistent liquidity depth, we can take a look at what happens when a token really does provide genuine liquidity and genuine utility. Back in January 2018, Sharpe launched their Centuri Dapp to crowdsource market insights, rewarding participants in ETH for their contributions, selling SHP tokens required to access the platform. At the time ETH was valued at $1000, and we all know what has happened to the market since then. But what about SHP? The original sale price was 0.00035 ETH per SHP. At the time of writing, SHP is trading at over 0.000556 ETH, at a 58% premium to the ICO price.
Crucially, you will notice that daily traded volume varies significantly. On some days, it is zero, yet on others it exceeds $100k, and this is precisely as it should be. Indeed, these are the sorts of volume patterns typically seen on ‘junior’ stock market exchanges, such as the London Stock Exchange’s AIM sub-market. Wash-trading assets that show a consistent $100k-1m daily traded volume achieves one thing: it deceives investors, and creates false support for a price that cannot be sustained. We can see how Helios Liquidity provides this support to SHP by simply taking a look at the order-book on the Liquid exchange.
If you’re in the market for a market maker, please contact us for our formal case study on Helios Liquidity’s Market Making services on the SHP token, and how we believe this has supported the consistent and sustained growth of the platform and token. Sharpe has grown Centuri to over 1200 token-holding users, of which 300 return daily, and have continued to acquire more SHP through organically growing interest. All the while, the Helios Market Maker is able to profit from its reducing SHP inventory, without requiring the sadly all too common practice of ‘dumping’ tokens on the market.
Talk to the Helios Liquidity Team
If you are interested in providing real liquidity and sustainable growth for your own token, please contact the Helios Liquidity team at official@heliosliquidity.com. Alternatively, you can reach out to us on telegram at t.me/helios_liquidity.
About Helios Liquidity
Helios Liquidity was formed in collaboration with Sharpe, a leader in blockchain investment and analytics. We provide liquidity services to our clients in the form of exchange listings, advanced market making, near-spot price OTC trading and secure escrow services. Helios Liquidity’s state-of-the-art tools developed for algorithmic trading, hedging and market making were developed by a team of 12 capital markets experts, engineers, and scientists at Sharpe.
Our goal is to help the market mature in the way that allows cryptocurrencies and decentralized technology to prosper. Having a background in traditional markets, we understand the steps required to achieve wider adoption of digital assets.
Official Channels:
Website: http://heliosliquidity.com/
Twitter: https://twitter.com/heliosliquidity
Facebook: https://www.facebook.com/heliosliquidity
LinkedIn: https://www.linkedin.com/company/helios-liquidity/
Email: official@heliosliquidity.com
