Wintermute, one of the largest crypto market-making firms, secured funding from Chinese tech giant Tencent. The firm has faced accusations of market manipulation in the past. Market makers aren’t performing black magic—but what exactly do they do?
Wintermute, a prominent cryptocurrency market-making (MM) firm, has recently secured a significant funding round led by Chinese technology giant Tencent Holdings. While the exact financial details remain undisclosed, this investment signals a significant endorsement from a major player in the tech industry. The company intends to establish a New York office and introduce over-the-counter trading products tailored for U.S. clients.
Tencent Holdings, headquartered in Shenzhen, China, is a multinational technology conglomerate renowned for its extensive range of internet-related services and products, including WeChat super-app and online gaming titles such as "Honor of Kings" and "Peacekeeper Elite".
Wintermute was founded in 2017 by Evgeny Gaevoy, who amassed over a decade of experience at Optiver, a prominent algorithmic trading firm in traditional finance, where he built and led the ETF trading desk.
This latest funding round follows a series of successful capital raises by Wintermute. In January 2021, the firm completed a $20 million Series B round led by Lightspeed Venture Partners, with participation from Pantera Capital, Hack VC, and others.
Prior to that, Wintermute raised $2.8 million in a Series A round in June 2020, also led by Lightspeed Venture Partners. Tracxn The company's initial seed funding occurred in January 2020, with contributions from Blockchain Coinvestors and FBG Capital.
In 2024, Wintermute reported significant growth in institutional activity on its OTC trading desk, driven by the approval of spot Bitcoin exchange-traded funds (ETFs).
However, in the crypto world, Wintermute's reputation is a little more murky.
As in traditional finance, market makers act as middlemen between asset suppliers and buyers. They play a pivotal role in guaranteeing market liquidity at all times, price stability, and low slippage for users.
The relevance of their role is heightened in the digital assets market, given the 24/7 trading hours and the high level of trading activity of users. Investors are generally more passive in traditional markets.
Additionally, the strategies of market makers in crypto are heavily influenced by volatility, sentiment, and hype dominating the trades in this space. High volatility leads to wider spreads, inventory risks, and arbitrage opportunities, while sentiment—whether bullish or bearish—affects liquidity depth and pricing adjustments. Hype-driven surges, often fueled by social media or influencers, create sudden liquidity demands and pump-and-dump risks.
The job of a crypto market maker starts before the initial launch of a token, when projects give them a long-term loan of a significant percentage of their circulating supply so that they place liquidity in order books across several centralized and decentralized exchanges and protocols, allowing trades to happen smoothly from the start.
The prices on digital asset markets are often far below their fair market value upon launching, which, according to Acheron Trading, frequently results in "much higher first-day pops" when markets are bull but are significantly lower when they are bear.
Projects expect their hired market maker to facilitate organic price discovery and provide liquidity at the market price when and only when needed.
Market makers provide liquidity throughout a project's lifespan by buying and selling to centralized and decentralized exchanges, DeFi protocols, and over-the-counter (OTC) counterparties.
The posts accusing Wintermute or other market makers of market manipulation by exclusively resourcing screenshots of the transfers between these players don't prove anything—transfers are part of the operational process and are bound to be larger if there is an increase in either buying or selling pressure.
Nonetheless, it is as possible as it is common, for market makers to abuse their positions.
Wintermute, like most other market makers, mostly opts for delta-neutral strategies, meaning that they balance multiple positions on an asset to mitigate the risk of small changes in their values.
This type of strategy leaves little space for directional trading strategies that aim to swing a token's price in their favor.
However, market makers might deploy parasitic profit-maximization strategies that are harmful to traders and projects alike.
Wintermute, for example, has been accused of offering less liquidity than the market requires, leading to increased price bids from FOMO. Critics of Wintermute have pointed out a "Wintermute pattern" on charts, which suggests that the company suppresses liquidity at the moment the token launches on centralized exchanges.
In other situations, market makers can aggressively short-sell their large token holdings, profiting from the inflated price while driving the token's price down sharply. Gaevoy denied using this type of strategy, claiming that shorting crypto has a "limited upside and unlimited downside."
In another post, Wintermute's CEO refuted any wrongdoing, stating that all their trading was strategic and part of the business: "We are very much interested not just in extracting as much as possible from various opportunities in the market, but also in this space continuing, evolving, and growing."