Long-Tail Market Making on dYdX

The trial has been a success, with RavenDAO in particular improving the spread and orderbook depth on 29 different markets. Spreads, a measure of execution capabilities, went from +20% (as a high as 70% at times) to now being consistently quoted at 0.5% or less. For reference, take a look at the IMX-USD market, a highly illiquid market, which used to trade with ~50% spread, and is now being offered at competitive spreads (below 0.5%).

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We have been working closely with the dYdX Trading team to measure their performances, and advise these teams on improving their market making methodology for better success. As an added benefit, the Trading team has used their experiences to guide their own product building and performance analysis. They are learning a ton about how to improve the order execution on dYdX.

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Given the trial’s success and support from the Trading team, we're extending this program for another 6 months. As part of this extension, we are budgeting up to 60 markets supported at a rate of $2,500 per market. We may not need all of this funding, but would like to allocate the necessary funds assuming more markets get launched and redundancy support is needed.