Coinbase to incent market makers to improve the liquidity of less liquid trading pairs

Crypto exchange Coinbase announced a new reward program for market makers that would improve the liquidity of its less liquid trading pairs.

The program aims to encourage participants to “diversify their activity across a wide range of trading pairs”, including low liquidity pairs and new trading pairs.

Market makers will need to meet certain conditions to qualify for the program. First, they will need to trade above a certain threshold in the 30-day Maker Adjusted Volume (AMV). The AMV multipliers for low liquidity and new trading pairs are 15x, medium liquidity (10x) and high liquidity (1x), suggesting that Coinbase wants to improve the liquidity of the first two categories of trading pairs.

The minimum AMV for the December program is $ 500 million. This means that eligible market makers with an AMV greater than $ 500 million would be charged a lower support fee than the current program (i.e. 3 basis points instead of 5 basis points). based). Market makers create markets for both buying and selling and are therefore subject to both market maker fees and taker fees. When they create markets or provide liquidity, they receive a maker fee, and when they withdraw cash, they are charged a taker fee. While there are almost always a taker fees, in some cases the manufacturer fees are zero.

Coinbase’s reward program comes four months after the exchange named former Circle executive Vishal Gupta as the new exchange leader in September. While crypto exchanges typically reward market makers, Coinbase’s program appears to be aimed specifically at improving the liquidity of its less liquid and new trading pairs.

Granted, the exchange has high liquidity for popular trading pairs, such as those related to bitcoin and ether, but its liquidity for other trading pairs is low compared to rival exchanges such as Binance. It remains to be seen whether this program will ultimately achieve its goals.

Coinbase said the schedule could change over time, including the AMV threshold and what are considered low, medium and high liquidity trading pairs. For the December schedule in particular, below is the classification of each trading pair and their AMV multipliers:

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