Blockstack Will Pay Liquidity Provider GSR to Trade Its STX Token

Blockstack, one of the first blockchain startups to have raised money in a Reg A+ offering, has hired GSR Markets to trade its "Stacks" token.

According to an Oct. 24 filing with the U.S. Securities and Exchange Commission, the blockchain startup will pay GSR for providing liquidity in markets outside of the U.S. Blockstack raised $23 million in its registered token offering in September, including $7.6 million from investors in Asia.

For a one-time setup fee of $100,000 and a monthly payment of $20,000 for six months, GSR agreed to "Provide services related to increasing the liquidity" of STX, as well as to analyze market conditions.

If the agreement should be terminated at a later date, GSR will return the bitcoin and ether, with half being calculated using the value of the cryptocurrencies against the value of STX. According to a separate agreement, GSR will trade STX using its proprietary trading bot, provide Blockstack with daily reports on the STX market activity, analyze the market conditions and seek new exchanges Blockstack could approach for listings.

Hiring a professional market maker to provide liquidity is a common practice on the legacy markets and has become one for the crypto markets, too, says Eric Wall, a former blockchain lead at trading tech company Cinnober.

Without such market participants, the volatility of crypto tokens can soar when there are too few actual orders.

Blockstack got STX listed on the Binance and HashKey Pro exchanges last week.

For the Binance listing, Blockstack paid 833,333 STX, or roughly $250,000, according to an earlier filing.

The company's CEO, Muneeb Ali, told The Block that it was a "Long-term payment" meant to incentivize Binance to keep STX listed "Over many years."

The token is currently trading at $0.20 per token on Binance, 30 percent down from its initial price of $0.30.