To address price discovery inefficiencies in centralized financial markets and over-the-counter markets, Wintermute co-founder Yoann Turpin is calling for greater adoption of DeFi.
In a social media post, Yoann Turpin, co-founder of Wintermute, an algorithmic trading platform focused on building liquidity in the digital asset markets, called out the challenges associated with price discovery in the crypto industry.
Turpin claims that centralized exchanges like Binance engage in private arrangements between large buyers and sellers, creating risks in how consumers interact with various projects in the crypto ecosystem, shifting market opportunities in favor of larger players.
“The role of a market maker is to promote price discovery by providing liquidity so that people with an opinion can express those opinions by buying or selling,” Turpin said.
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The former music prodigy turned crypto mogul argued that prices are unfair to ordinary buyers due to the influence of large institutions and traders in the market, with large markets effectively controlling price formation.
According to him, large centralized entities can effectively control price developments by concentrating trading activities, liquidity and order flows on their platforms:
if you put all this together that means:
when prices go up, they go up in cefi first meaning market makers typically sell on cefi and buy back in defi.
when prices go down, market makers typically buy on cefi first and sell back in defi.
over time, this ensures everyone…
— Yo 🇸🇬 (@YoannTurpin1) January 13, 2025
On the decentralized Solana meme marketplace pump.fun, Turn wrote that price discovery for meme coins is being initiated, a process that uses the early phase of token launches, using limited liquidity and small market size to drive initial trading activity behind the scenes, without retail activities.
He adds that Wintermute does not engage in such marketplaces, which underlines the challenges of price discovery in environments defined by limited liquidity and smaller market dynamics, which he says is poised to make Wintermute a bigger participant in the DeFi ecosystem to make.
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