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Empirica: Revolutionizing Liquidity and Market Making in the Crypto Space

Hello! 

We’re excited to have the opportunity to speak with you about Empirica and the innovative work you’re doing in the crypto market making and liquidity space. Let’s dive into how Empirica is shaping the future of liquidity for token projects.

1. Could you start by giving us an overview of Empirica and its mission in the crypto market-making space?

I suggest skipping the mission statement, leaving it to the marketing department, and giving you a straightforward overview of our journey in the crypto space. We entered the market-making scene in 2017, right when the crypto market was experiencing significant growth. Bitcoin had reached its then-peak of $20,000, ICOs were abundant, and new crypto exchanges were emerging rapidly.

At that time, the total cryptocurrency market cap exceeded $800 billion, with numerous web3 projects launching their tokens. Each of these tokens needed liquidity, which presented an opportunity for us. We had spent 13 years developing our liquidity engine for traditional brokerages and stock exchanges, so this surge in crypto prompted us to shift our focus to digital assets.

Now, we’re here to help token projects and crypto exchanges provide the liquidity they need to grow. Our goal is simply to support the smooth operation of these markets by ensuring there’s always someone ready to buy or sell these new assets.

2. Empirica has a strong track record in providing liquidity on both CEX and DEX platforms. How does your approach differ when managing liquidity on centralized versus decentralized exchanges?

The main difference in our approach to centralized and decentralized exchanges comes down to handling what we call “impermanent loss” on DEXes. This occurs when asset prices change after liquidity is added, which can be challenging for liquidity providers.

Think of it like this: on a DEX, providing liquidity is a bit like parking your car in a lot where the parking spaces keep moving. You might come back to find your car isn’t where you left it, and it takes time and effort to retrieve it. Sometimes, you might even lose value in the process.

On decentralized exchanges, we use systems that automatically adjust the liquidity range as prices change. It’s like having a smart parking system that keeps relocating your car to the optimal spot.

Our approach is more straightforward for centralized exchanges. We essentially keep the market well-stocked at all times. Our algorithms continuously place orders to balance buying and selling, ensuring enough market depth for retail investors and keeping the price spread tight.

The goal on both types of exchanges is the same: we want anyone who wants to trade a token to be able to do so easily, without worrying about whether there’s someone on the other side of the transaction. It’s just that the methods we use to achieve this differ based on the exchange type.

3. Your algorithms play a crucial role in stabilizing token prices and ensuring market depth. Can you explain how these price-stabilizing algorithms work in practice?

Our algorithms address a common issue in the crypto market: lack of market depth. When there aren’t enough buy or sell orders, you tend to see big price swings. Add to that the price differences across various token markets, and you’ve got a situation that can make investors hesitant due to potentially higher trading costs.

What our algorithms do is fairly straightforward but effective. They provide liquidity very close to the current market price, typically within 2% above or below. This approach serves two main purposes: first, it narrows the spread between buy and sell prices, making trading more cost-effective for investors, and second, it helps prevent significant price differences between different markets for the same token.

We apply this strategy to both centralized and decentralized exchanges. The goal is to create a more stable, predictable trading environment, which can, in turn, help attract more investors and increase overall market activity.

4. You’ve worked with many notable exchanges and token projects. What are some key challenges Empirica helps overcome when it comes to token liquidity and listing?

Our main focus is building value for our clients’ tokens. We provide liquidity on both CEX and DEX platforms, handling market depth, spread, and slippage. Beyond this, we actively seek new markets for our clients’ tokens, recognizing opportunities outside mainstream exchanges. We discuss these possibilities with clients, introduce them to selected exchanges, assist in negotiations, and ensure liquidity when they debut on new markets. We consider this comprehensive approach part of our core service as market makers, aiming to create a robust ecosystem for each token we support.

5. Can you tell us more about how your 24/7 liquidity management system benefits token projects, especially in terms of price stability and reducing slippage?

It’s important to go back to the basics of market making, which ensures smooth trading of a given token, not, as some believe, boosting volume and price. Of course, by providing favorable conditions for investors, like narrowed spread and market depth, we indirectly influence these metrics, but that is not the primary goal. This is how it works: someone wants to buy a large amount of your token, but there aren’t enough sellers at that moment, no market depth. That unmet demand means you miss out on volume and a potential price increase for your token. This is where market makers bridge the gap. Web3 companies hire market makers like us to avoid missed opportunities and keep things running smoothly. This, in turn, leads to an increase in volume and price. Our algorithms make sure there’s always a balance between buyers and sellers, ensuring the market is active almost all the time. We call that “uptime”. 

6. How does Empirica’s expertise in algorithmic trading contribute to improving liquidity for token projects, particularly during volatile market conditions?

Volatile markets can be tough due to unpredictable price swings. While investors might see big rewards, they also face greater risks. Meme coins are a good example – extremely volatile, highly speculative, and driven by viral trends. A market maker could quickly face heavy losses in such markets. We approach it twofold; from one side, we do a lot of testing, including tests on historical data; on the other, we have invested a lot in analytical tools, including on-chain analysis, helping adjust to market conditions.

7. You offer both short-term and long-term liquidity solutions. Could you explain the importance of long-term liquidity in maintaining healthy market conditions?

Long-term liquidity is key for a healthy market. Investors need to know they can buy or sell at any time, day or night. If they can’t, they might see the token as risky and avoid trading. Each trade that doesn’t happen is a missed opportunity, and these can add up over time. That’s where we come in. We’re always there, ensuring anyone can trade when they want. This steady presence helps build trust and keeps the market growing. It’s not just about being there at the start – it’s about staying committed to helping the token thrive in the long run.

8. Empirica has been recognized for its work in the crypto space with partnerships and awards. How do these collaborations help you better serve Web3 and blockchain startups?

We are engineers at heart. We started in 2013 as a FinTech company building algorithmic trading software. We experienced significant growth as a tech company in Central and Eastern Europe, which Deloitte recognized with an award in this category. Our software still operates in many financial institutions, including the Warsaw Stock Exchange. Today, it helps us provide liquidity for digital assets. As market makers, we actively engage in educational initiatives for the broader crypto community. We mentor Web3 startups in the Cointelegraph Acceleration Program, create our liquidity reports, and make them available to projects on our website.

9. What are some key insights or strategies you recommend for projects looking to improve liquidity and trading conditions on their token listings?

Like rain is for plants, liquidity is essential for tokens to grow. But projects shouldn’t look for shortcuts like wash trading. It’s a form of manipulation where algorithms simultaneously buy and sell the same asset, creating the illusion of liquidity and activity on a token. Behind these artificially generated trading volume metrics, there are no actual transactions. Tokens do this to grab temporary attention by climbing the rankings. Unfortunately, many market makers are supporting this. Such a “pump” often ends in a token dump. We advise our clients to focus on product development and increase their marketing efforts instead. Organic volumes will increase, and it’s our job to ensure that happens.

10. Lastly, with the rapid evolution of crypto markets, how does Empirica plan to continue innovating and supporting liquidity for emerging Web3 projects in the future?

We invest heavily in developing new tools, especially in the DeFi space. One of them is a crypto vault for managing project-own liquidity in DEX markets, mitigating counterparty risk. This will be combined with automated position adjustment in the pool. For our clients, this means less treasury funds to ensure liquidity. Besides, few people know that we use AI and machine learning algorithms in our trading operations. 

Michal Rozanski

Cofounder and CEO at Empirica

Empirica – market  maker and liquidity provider for token projects and crypto exchanges

https://empirica.io

Thank you for sharing these valuable insights! 

We’re looking forward to seeing how Empirica continues to provide essential liquidity solutions and support the growth of the crypto ecosystem.