Market making and grid trading often give the impression of an almost obvious strategy. The reasoning is simple: if the market oscillates, then you just need to capture these oscillations to generate a regular return. But one question remains central: does this type of strategy really make it possible to beat the market in the long term? The answer is less intuitive than it seems. The models say that you can win on the spread if inventory is held; the whole cycle says that big directional phases still matter, especially in crypto. For reading that takes swing harvest and diet risk in the same framework, the Neutralis strategy page lays it out simply. This article contains affiliate links allowing you to support the daily work of the Journal Du Coin teams.
What the theoretical models say
In the academic literaturemarket making has been studied for a long time, particularly through models like that ofAvellaneda et Stoïkov.
This work shows that a market maker can generate a return by capturing the spread, provided that it correctly manages its inventory and adjusts its prices according to volatility. In these models, the expected return depends mainly on three factors : the level of volatility; the frequency of exchanges; the ability to control exposure. In a stable environment, the results are clear: the strategy can produce a positive return, often a few percentage points above a neutral position. But these results are based on strong assumptions.
These models generally assume…
a liquid market; relatively stationary volatility; above all, reversible movements. In other words, they implicitly assume that the price returns regularly to an equilibrium zone. However, this is not always the case.
What backtests and real experience show
When we apply these strategies to real data, the results are much more mixed. Over lateral time frames, some grid trading strategies can generate between 10 and 30% annualized, with moderate volatility. But as soon as the market enters a prolonged trend, the situation changes. During strongly bullish phases, these strategies often underperform a simple buy and hold, because they gradually sell their exposure. During strongly bearish phases, they can record significant losses by accumulating a declining asset. Empirical analyzes show that over complete cycles, performances are very dependent on entry timing and market regime. Understanding these dynamics in detail A Neutralis conference presents quantitative strategies that exploit crypto volatility while limiting dependence on a single direction.
The real answer: yes… but not as we imagine
Yes, he is possible to beat the market with market making. But only in certain contexts. And above all, not constantly. A pure grid trading strategy can outperform in sideways or erratic markets. But it tends to underperform in strong trend phases, which are precisely those that generate a large part of the crypto market's performance. This is the point that is often ignored.
A simple example to understand
Let's take two investors over a given period. The first adopts a strategy of grid trading. The second remains exposed in buy and hold. If the market oscillates for several months, the grid strategy can generate a steady return, while buy and hold stagnates. But if the market then goes up 100%, the buy and hold captures the entire movement. The grid strategy will have gradually reduced its exposure. Over the entire cycle, it can therefore underperform, despite good intermediate performances.
Why professional actors don't stop there
It is precisely for this reason that the professional desks almost never use “pure” grids. They combine several approaches. Market making is used to capture volatilitybut it is framed by risk management or even hedging mechanisms. The objective is not simply to generate returns locally. It is to control the overall trajectory.
A logical evolution of strategies
Over time, a form of consensus emerged. Strategies based solely on oscillations are effective… but incomplete. They must be integrated into a broader framework, capable of adapting to different market regimes. It is this evolution which gave birth to hybrid approachescombining exploitation of volatility and management ofdirectional exposure.
What this changes for an investor
So the question is not simply whether a strategy can beat the market. But under what conditions it can… and at what price. A strategy can perform well for several months, then lose that advantage when the environment changes. It is this variability that must be understood.
A different approach
Certain strategies seek to respond precisely to this limitation. They retain the interest of market makingbut add mechanisms aimed at reduce dependence on directional phases. The objective is no longer just to capture oscillations. It becomes smooth performance on different environments. This is in particular the logic followed by the Neutralis strategy, which is part of this more structured approach. Market making is neither a miracle solution nor an ineffective strategy.
It's a tool. Used well, it can generate returns. If poorly managed, it can become highly dependent on the market. Understanding this nuance already means avoiding one of the most frequent mistakes in crypto: believing that a strategy works… simply because it has worked well recently.