Market makers, also known as liquidity providers (LPs), specialize in providing market liquidity to ensure the healthy development and stable operation of projects. In traditional finance, market makers are strictly regulated; however, in the cryptocurrency industry, their growth has been notably "unrestrained," leading to criticism that this niche sector has "participated in driving the collapse of numerous projects," "acted as middlemen profiting from spreads," and "created an illusion of prosperity in the industry."
The collapse of FTX and the subsequent turmoil in major platforms highlighted market makers and lending as particularly vulnerable areas. For general investors, discussions about market makers often feel like a game of blind men describing an elephant. Behind all the controversy, what are the thoughts of market makers regarding regulation, liquidity, and competition? At the TOKEN 2049 conference, BlockBeats conducted an exclusive interview with Yoann Turpin, co-founder of Wintermute, a well-known cryptocurrency market maker.
Wintermute is currently one of the most prominent market makers in the cryptocurrency space, having participated in market-making for projects such as dYdX, OP, BLUR, ARB, and APE. Yoann Turpin, a graduate of EDHEC Business School, previously served as co-founder and CFO of Innovify, founder of Kaifuku Capital, and holds several other notable positions.
Maintaining "Market Neutrality"
What is Wintermute’s current scale? According to its official website, Wintermute has cumulatively traded over $2 trillion in volume. Data from watchers indicates that Ethereum comprises the largest portion of Wintermute’s traded assets, yet this represents less than 1% of its overall token portfolio.
BlockBeats: Please introduce yourself and Wintermute.
Yoann: We co-founded Wintermute in 2017 and now have a team of nearly 100 people. Compared to the 20-person team in 2021, our growth has been significant, reflecting Wintermute’s evolving structure. We aim to become an increasingly diversified platform focused on trading markets. In 2021, we expanded into Singapore’s derivatives market.
We engage more in over-the-counter (OTC) trading, serving clients while maintaining proprietary accounts. Wintermute has grown into one of the largest spot market makers globally, accounting for 16%–20% of total trading volume. In derivatives, we rank among the top five in options. We are active investors, with around 100 projects and approximately $100 million in venture capital investments.
We’ve also incubated projects like Bebop and increasingly participate in public investments. Wintermute prefers to remain small and focused. Once a single entity manages multiple businesses, operations can become chaotic. Thus, we spin off initiatives or collaborate with external partners. More frameworks around incubation and development will be unveiled soon.
As a founder, I focus on venture capital deals and business development, particularly in Asia. This involves extensive exploration in Korea, Japan, and upcoming ventures in New York and Indonesia.
Avoiding Overexpansion
MetaStone: How did Wintermute navigate the bear market? What strategies does Wintermute employ during DeFi liquidations, and how will on-chain derivatives impact the market?
Yoann: During market downturns, we start buying as others sell, often resulting in long positions. Even if these positions incur losses, the bid-ask spreads compensate. This is how we endure bear markets.
Regarding DeFi, misconceptions abound. People assume we sell on DeFi protocols, but often, we buy on centralized exchanges (CeFi) like Binance and transfer tokens to DeFi for liquidity. We maintain market neutrality—profiting from spreads via millions of daily trades rather than directional bets.
BlockBeats: Rumors suggested Wintermute withdrew during a market crash, exacerbating the downturn. Your response?
Yoann: As a top liquidity provider, such speculation is inevitable. However, we performed well. Market trends fluctuate, and while competitors employ 200–500 staff, our lean team of under 100 ensures efficiency. We avoid overexpansion, which proved advantageous during the crypto winter.
Token Selection Criteria: Scale and Longevity
MetaStone: What criteria guide Wintermute’s token selection? Do you borrow tokens from foundations?
Yoann: Partnerships matter. We borrow tokens ensuring aligned interests, typically 2–3% of fully diluted valuation (FDV). Projects need an FDV exceeding $100 million and exchange presence. Reputable market makers aid exchange listings.
BlockBeats: Can Wintermute profit during extreme downturns?
Yoann: Sharp declines harm everyone, but our structured approach mitigates losses. Even in traditional finance, crises impact balance sheets. Effective liquidity provision minimizes market disruption.
Ethical Self-Regulation
Rivalry with DWF Labs
Beyond Wintermute, DWF Labs stands as a notable competitor. In March, Wintermute and DWF Labs clashed publicly, with DWF accusing Wintermute of media smear campaigns and Wintermute questioning DWF’s practices. Yoann criticized DWF for "marketing OTC trades as investments," calling it fundamentally flawed.
BlockBeats: Your views on DWF Labs? Do you consider their methods manipulative?
Yoann: They aren’t market makers by our definition. Announcing OTC trades as investments misleads. Investments imply long-term holds, whereas trades are short-term. Selling post-announcement undermines trust. Open systems necessitate education to prevent exploitation.
We advocate light regulation to curb bad actors while avoiding traditional finance’s exclusionary pitfalls. Crypto must strike a balance, evolving over time.
Steering Clear of U.S. Regulation
MetaStone: How might SEC scrutiny of tokens/NFTs reshape Web3?
Yoann: In 2021, we avoided the SEC by registering in the UK for spot trading and basing derivatives in Singapore. U.S. operations are minimal, with Asia now our focus.
"Liquidity Provider," Not "Market Maker"
BlockBeats: Traditional finance tightly regulates market makers. Crypto lacks this. Thoughts?
Yoann: Unethical actors face exposure and downfall. We operate beyond legality—prioritizing ethics and long-term alignment. Education is key. We avoid "market maker," preferring "liquidity provider," aiding price discovery.
Internal standards are high; competitors are classified as good or bad. Good ones receive co-investments or referrals.
Solana: The Next Polkadot?
Yoann shared insights on blockchain futures. While Ethereum leads in total value locked (TVL), he believes Solana could rival Polygon as Ethereum’s closest competitor.
MetaStone: Linea, Base, and Layer 2s are rising. Modular blockchains aid Ethereum scaling. Thoughts?
Yoann: We’ve invested in most Layer 2s except StarkWare, which was overvalued at $20 billion. Choosing chains is tough; reliable smart contract developers are scarce.
BlockBeats: EVM compatibility matters. Polkadot once had the second-largest dev community. Who’s next?
Yoann: Likely Solana, though data is hard to verify. Many teams build initial apps there before pivoting. Ethereum remains the leader, but Bitcoin’s utility grows slowly.
FAQs
1. What distinguishes Wintermute from traditional market makers?
Wintermute emphasizes liquidity provision over market-making, focusing on ethical operations and price discovery rather than directional bets.
2. How does Wintermute handle market crashes?
Through structured strategies, Wintermute buys during downturns, leveraging bid-ask spreads to offset potential losses from long positions.
3. Why does Wintermute avoid U.S. markets?
U.S. regulatory complexities prompt Wintermute to focus on Asia and Europe, ensuring smoother operations under clearer frameworks.
4. What’s Wintermute’s stance on competitors like DWF Labs?
Wintermute critiques competitors that blur investment and trading lines, advocating transparency and long-term ecosystem health.
5. Which blockchain does Wintermute see as Ethereum’s successor?
Solana shows promise, though developer migration and project longevity remain key factors.
6. How does Wintermute select tokens for market-making?
👉 Wintermute prioritizes tokens with large FDVs and strong exchange presence, ensuring liquidity and alignment with project goals.
👉 Explore Wintermute’s approach to ethical liquidity provision in volatile crypto markets.