Purity and dangers: Market making, structural uncertainty, and circuits of exchange in the cryptoeconomy

Abstract

Market making is a crucial activity in financial markets, expected to reduce uncertainties related to price and liquidity information, and to enable strategic interactions among traders. Sociologists of finance have recently emphasized the role of automation and calculative devices such as algorithms in market making, highlighting the transition from informal human interactions on the trading floor to multilayered, formalized interactions involving both algorithms and human actors. In this process, social relationships become infrastructural to calculative devices. Less understood is what happens when uncertainties cannot be mitigated by the use of calculative devices and by the relationships infrastructural to them. We argue that in such situations market participants resort to circuits of exchange as arrangements that allow them to continue their activities in a legitimate manner. We ground the argument in an ethnographic investigation of market making in crypto markets, where traders are confronted with uncertainties that cannot be solved only by using algorithms. We show that market makers resort to horizontal and vertical circuits in order to address uncertainties and legitimize their activities. We make a double contribution: theoretical, by arguing that circuits and market transactions are not mutually exclusive; empirical, by showing that market makers harness circuits in order to endow their activities with legitimacy.