Put your Bitcoin to work by investing easily with Market Making. Market Making trades your funds for you automatically 24/7, and earns an income by helping other LVL users exchange their cash and crypto. Market Making provides all the liquidity on the LVL exchange.
Market Making uses a proven trading strategy of the same name, and is powered by state-of-the-art algorithms. Your assets are used to buy crypto below market price and sell it back above market price (your spread). This provides value by creating liquidity for other users, and you earn a profit on the spread you charge.
On Many marketplaces, Market Making is an exclusive privilege reserved for the marketplace or high frequency trading firms. On Coinbase Consumer, for example, consumers are charged a 2-17% Market Making fee, with all proceeds going to Coinbase. With LVL, we offer Market Making to all LVL Premium members, and we don’t take a cut.
To activate Market Making, go to the Home screen and tap Market Making. First, you can add funds (cash, crypto, or both), and then turn on the coins you want to trade with the toggles. Once funded and assets are toggled, it will begin attempting to trade. The screen will list the 10 most recent trades made.
The percentage shown on screen is reporting the change in the value of holdings, compared to just holding cash, over time. In this way, both asset price changes, and trading gains/losses, will both affect this metric.
Market Making provides all of the liquidity for market orders. When a LVL member places a market buy or sell, they are buying from or selling to a Market Maker. The assets you add are not being lent, they are actively traded with. It will hold and automatically maintain a balanced inventory of roughly 50/50 cash and crypto. The crypto you add will be sold for cash, this cash is used to buy more crypto, and this cycle continues so that you can earn in both assets over time.
Since it usually holds some cash, by using Market Making you inherently lose some exposure to movement in the asset price, in exchange for a potential return from market making. This can also be thought of as a hedge against a down market.
In our analyses of Market Maker performance during Q2 of 2021, we found they generated an average APY of 76%, and you can read more about this here.
Trades performed by Market Making are normal limit orders, and are all taxable events. During tax season, we will send you a spreadsheet of all trades (manual orders and automated trades), and an 8949 Equivalent which calculates your cost basis, and profit/loss, from all these trades. You can read more about our tax information here.
No investment strategy can completely eliminate the risk of investment losses. You are responsible for the risks and the financial resources you use to determine an investment strategy. You should not engage in trading unless you fully understand the nature of the transactions you are participating in and the extent of your exposure and tolerance for investment losses. If you do not fully understand the risks involved in trading, we encourage you to seek independent advice from a financial advisor.
To add funds to Market Making:
- From the Home screen, tap Market making
- Press Add
- Select the asset you want to add: cash or crypto (you can add either or both)
- 4. Enter an amount of the asset to add
- Press the Add button
- Slide to confirm
You can add more funds to Market Making anytime, these transfers are free and instant. Once you add funds, you can then enable trading by switching the toggles on for the assets you want Market Making to trade.
Once Market Making is funded, engage trading for an asset by switching on the toggle for that asset. You can engage one or more assets at once. Once funded and engaged, it will begin trading automatically. You can turn trading on and off anytime by turning the asset toggles on and off.
It will start posting limit orders every few minutes, waiting to match and fill other LVL members’ market orders. As you fill orders, the last 10 will show in the Activity list.
To remove funds from Market Making:
- From the Home screen, tap Market Making.
- Remove the toggles from all coins, which stops trading
- Press Remove
- Select the asset you want to remove: cash or crypto
- Enter an amount of the asset to remove
- Press the Remove button
- Slide to confirm
You can remove funds from Market Making anytime, these transfers are free and instant. The cash you remove will go back to your LVL checking account, and the crypto will be moved to its respective wallet.