- Jakob Brezigar
- Updated: August 15, 2025
- Reading time: 6 min
Retainer vs Loan Model – How to Choose the Right Crypto Market-Making Structure
Choosing between a retainer and loan model is crucial for crypto market making. The retainer model offers transparency, control, and predictable costs, but issuers bear full risk. The loan model reduces upfront costs and aligns incentives with market makers, yet risks token dumping and regulatory complexity. Tracking KPIs like uptime, spreads, and depth is essential. In 2025–2026, hybrid approaches and standardized benchmarks will define sustainable liquidity strategies.
Orcabay, an experienced market maker active on over 30 exchanges — including Binance, Bitstamp, and Coinbase — specializes in delivering tailored liquidity solutions. Contact us to learn more!
Why This Choice Matters in Crypto Market-Making
Liquidity is essential for token success. The retainer model and loan (loan/call option) model are the two dominant ways to structure market-making relationships between token issuers and liquidity providers.
Each model affects capital control, risk allocation, transparency, and incentives differently, making the choice critical for both short-term stability and long-term growth.
What Is the Retainer Model?
In the retainer model, the token issuer provides both the token inventory and the quote-side liquidity (usually stablecoins) and pays the market maker a fixed monthly fee for executing liquidity strategies.
Key traits
- Capital control: Issuer retains ownership of both sides of the book.
- Strategy control: Issuer can define or adjust parameters and targets.
- Cost predictability: Fixed fees simplify budgeting.
- Risk: Market risk is borne entirely by the issuer.
This structure aligns with Market Making as a Service (MMaaS), focusing on transparency and accountability, where KPIs and execution quality are measurable in real time.
What Is the Loan Model?
In the loan model (or loan/call option model), the token issuer loans tokens to the market maker, often alongside granting a call option to purchase tokens at a pre-agreed strike price. The market maker uses these tokens to provide liquidity and retains upside if the token price increases above the strike.
Key traits
- Capital source: Tokens come from issuer; market maker provides own quote capital.
- Incentives: MM benefits if the market appreciates, potentially aligning with growth.
- Risk: MM bears more market exposure but can also liquidate holdings.
- Cost: Often no fixed monthly fee; payment comes from option value or profit share.
While this can motivate MMs to maintain liquidity, opaque terms and token-dumping risks have been common pain points.
| Criteria | Retainer Model | Loan Model |
|---|---|---|
| Capital Source | Issuer provides token + quote capital | Issuer loans token; MM uses own quote capital |
| Strategy Control | Defined and adjusted by issuer | Defined and executed by MM |
| Risk Allocation | Issuer bears market risk | MM bears some market risk; may liquidate inventory |
| Incentives | Fixed fee; focus on execution KPIs | Upside if token appreciates; risk of misalignment |
| Cost Structure | Predictable fixed monthly fee | Variable; often tied to option value or profit share |
| Transparency | High; real-time KPI monitoring possible | Lower; terms often private and performance opaque |
How to Compare Retainer vs Loan Model
Which KPIs Should You Track?
For both models, effective oversight depends on measurable indicators:
- Uptime: >95% quoting availability across chosen venues.
- Latency: Low-latency infrastructure for competitive pricing.
- Spreads: Targeted bid–ask spread (e.g., ≤10 bps) for healthy liquidity.
- Depth: Order book depth aligned with daily trading targets.
- Volume Share: Share of total market volume on integrated exchanges.
- Reporting: Real-time dashboards or weekly/monthly reports.
Which Compliance Elements Matter?
Regulatory expectations are rising:
- AML/KYC checks on counterparties.
- Contract transparency: Strike price, option duration, tranching (loan model) or KPI thresholds (retainer model).
- Securities law considerations: Loan models with call options may be treated as derivatives in certain jurisdictions.
Example Scenarios
Scenario A – Retainer Model
A token issuer with $50M FDV hires a market maker under a $12,000/month retainer to cover three exchanges. Issuer provides $1M in liquidity (token + USDC), retains full control, and sets KPIs for 98% uptime and ≤0.5% spreads. At contract end, all capital returns to issuer.
Scenario B – Retainer Model
A project loans 3% of supply to a market maker with a call option at 15% above spot price for 12 months. No fixed fees are paid. The MM executes liquidity strategies; if price rises, MM exercises option. If price falls, issuer risks market perception of token dumping.
| Step | Question / Action | Yes → | No → |
|---|---|---|---|
| 1 | Do you have sufficient capital to fund token and quote sides? | Step 2 | Loan Model |
| 2 | Do you want full control and KPI monitoring? | Retainer Model | Step 3 |
| 3 | Are you willing to bear full market risk? | Step 4 | Retainer Model |
| 4 | Do you want to incentivize MM with share in price appreciation? | Loan Model | Retainer Model |
2025 Trends and 2026 Predictions
2025 Observations
- Shift toward transparency: More issuers prefer retainer models to avoid token-dumping reputational damage.
- Hybrid approaches: Combining fixed fees with performance incentives is gaining ground.
- Regulatory focus: Loan models face more scrutiny under securities and derivatives frameworks.
2026 Outlook
- Standardized KPI frameworks: Industry-wide benchmarks for uptime, spread, and reporting.
- Greater institutional participation: More professional MMs entering with compliant structures.
- Hybrid dominance: By 2026, many contracts may blend retainer stability with loan-based upside incentives.
Conclusion
The retainer vs loan model decision shapes how a project controls capital, manages risk, aligns incentives, and meets regulatory expectations.
- Retainer model offers predictability, transparency, and issuer control, but requires more working capital and exposes the issuer to full market risk.
- Loan model can reduce up-front costs and align incentives with market makers, but carries higher risk of misalignment and potential regulatory complexity.
As 2025 unfolds, market participants increasingly favor clear KPIs, transparent reporting, and hybrid structures. In 2026, expect standardized practices and more regulatory clarity—making informed model selection even more important.
Orcabay leverages deep experience in algorithmic trading, token liquidity management, and exchange partnerships to help issuers choose and implement the optimal structure for their goals.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial, investment, or other professional advice. All opinions expressed herein are solely those of the author and do not represent the views or opinions of any entity with which the author may be associated. Investing in financial markets involves risk, including the potential loss of principal. Readers should perform their own research and consult with a licensed financial advisor before making any investment decisions. Past performance is not indicative of future results.
Jakob Brezigar
Jakob, an experienced specialist in the field of cryptocurrency market making, boasts an extensive international presence. With Orcabay, he has skillfully managed major operations and deals for a wide array of global stakeholders.
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