1. What Is Automated Market Making (AMM)?
AMM (Automated Market Maker) is a mechanism that provides liquidity to a trading market through an algorithmic model. Unlike traditional order book trading, which relies on manual orders placed by individuals or institutions, an AMM injects users’ funds into a liquidity pool. The system then automatically places buy and sell orders across different price ranges based on predefined algorithms, continuously providing two-way liquidity to the market.
In simple terms:
BitMart users deposit funds → The system automatically places orders → Users earn trading fee rewards.
BitMart’s AMMbot allows any user to become a Liquidity Provider (LP). No professional trading experience is required — you simply contribute funds to the pool, and the system takes care of the rest.
2.What Algorithm Does AMM Use?
AMMbot adopts the Constant Product Market Maker (CPMM) model. When users add liquidity to the pool, they must deposit two assets in proportion. The product of these two asset quantities remains constant.
The core formula is:
x × y = k
Price = y / x
Where:
- x represents the amount of the base asset in the pool (e.g., BTC)
- y represents the amount of the quote asset in the pool (e.g., USDT)
- k is a constant, representing the depth of the liquidity pool
Each time a trade occurs (buy or sell), the system automatically adjusts the asset ratio in the pool to maintain the constant product relationship. The market price is determined by the ratio between the two assets: for example, when users buy BTC, BTC (x) in the pool decreases while USDT (y) increases, causing the price to rise.
3.Key Features of AMMbot
- Automated Order Placement — The system automatically places buy and sell orders across multiple price levels, eliminating the need for manual operation.
- Continuous Liquidity — The market maintains tradeable depth even when there are no active manual orders.
- Post-Only Protection — All AMMbot orders are “Post-Only,” ensuring they do not take liquidity (i.e., never execute immediately as taker orders).
- Dynamic Rebalancing — After trades occur, the pool automatically adjusts the asset ratio to maintain a constant product (k value).
- Real-Time Fee Accumulation — Trading fees are automatically added to the pool and distributed proportionally.
- Free Deposit & Withdrawal — Assets can be freely transferred between your spot account and AMM account through liquidity addition or removal. Each user can add liquidity to a market an unlimited number of times per day, and no additional fees are charged during this process.
4.How Do LPs Earn from AMM?
Liquidity providers earn income primarily from trading fees. Whenever users trade in a market that you’ve provided liquidity to, a portion of their trading fees is distributed to all LPs in proportion to their share of the pool.
5.What Is Impermanent Loss?
Impermanent Loss refers to the difference in value between holding tokens in an AMM pool versus holding them directly in your wallet, caused by price fluctuations between the two assets. It is not a realized loss, but rather a temporary value difference that becomes apparent when liquidity is withdrawn.
Example:
- User A deposits 1 BTC and 20,000 USDT into the BTC/USDT pool (BTC = 20,000 USDT at the time).
- Later, BTC rises to 25,000 USDT.
- The pool now holds less BTC and more USDT (since users have bought BTC).
- If User A withdraws liquidity at this time, the total value received will be lower than simply holding 1 BTC + 20,000 USDT.
This difference is called impermanent loss. However, in most normal market conditions, trading fee income can offset or even exceed this temporary loss over time.
6.Which Trading Pairs Support AMM?
Currently, AMMbot is available for selected trading pairs. Please refer to the official AMM Market Page for the latest list of supported pairs and real-time performance metrics.
⚠️ Risk Disclaimer
Funds deposited into the liquidity pool participate in automated market making. When market prices fluctuate, impermanent loss may occur, and the quantity of assets you withdraw may vary significantly. As prices stabilize, the impermanent loss can gradually diminish, allowing realized trading fee income to reflect the overall return.
This document is for informational purposes only and does not constitute investment advice.
💬 Further Assistance
If you have additional questions or require support, please contact the BitMart Customer Service Team or refer to the latest Pre-Market and AMM Announcements for more detailed guidance.
