- Two key market makers are quitting the US over regulatory concerns
- Jump Crypto and Jane Street are pulling out of the US, although they will retain a presence elsewhere
- The move may see reduced liquidity and increased volatility in the markets
Top crypto market-making companies Jane Street and Jump Crypto are reducing their involvement in crypto trading in the US due to increased regulatory uncertainty. Bloomberg reports that the two firms, which are pivotal in providing liquidity for the crypto market, are pulling out of the US because of the tone adopted by lawmakers and regulators regarding policing the space, with Jane Street leaving the crypto space altogether. The news will not be welcomed by crypto traders as a reduction of liquidity will mean more exacerbated spikes during large moves.
Regulatory Uncertainty Spreading Further
Crypto regulation in the US is famously impacting exchanges, with Coinbase having warned that many, like itself, could up sticks and leave the country for more welcoming shores if the situation doesn’t see some clarity. It seems that the uncertainty has spread to market makers, which are companies that provide liquidity to a cryptocurrency exchange or trading platform by buying and selling cryptocurrencies. Market makers help to facilitate trading by ensuring that there are always buyers and sellers, which helps to prevent large price fluctuations due to a lack of liquidity.
According to Bloomberg, two of the biggest are stepping away from the US due to fears that they could be caught up in the ever-shifting regulatory net. Jane Street is said to be downsizing its global aspirations in the crypto industry thanks to the regulatory uncertainty making it “difficult for the firm to operate the business in a way that meets internal standards”, while Jump Crypto, the digital asset trading arm of Jump Trading, is retracting from the US market alone for the same reason.
Both companies will still be active market makers in the industry, Bloomberg days, but at a reduced capacity.
Traders Will Feel the Impact
Without market makers, the crypto market could be subject to large price fluctuations due to the imbalance of supply and demand, especially with naturally less liquid coins. This can make it challenging for traders to enter or exit positions at desired prices, and it can also increase the risk of market manipulation by those with large enough holdings to affect prices.
In short, market makers play a crucial role in ensuring the smooth functioning of markets by providing liquidity, helping to stabilize prices, and ensuring that buyers and sellers can transact with each other efficiently. Without them, wild spikes in both directions are much more likely.
