This proposal aims to improve liquidity for HDX/USD and HDX/EUR on Kraken.
Kraken is one of the most relevant fiat gateways for HDX. However, a listing only creates value if users can trade with reasonable size, low slippage and reliable order book depth. Better Kraken liquidity makes HDX more accessible to external traders and improves Hydration’s visibility outside the on-chain ecosystem.
CEX liquidity also matters beyond Kraken itself. Platforms like CoinGecko and CoinMarketCap score markets based on liquidity, volume, spread, order book depth and related market-quality metrics. Stronger Kraken liquidity can therefore improve both the actual trading experience and how HDX markets are perceived externally.
I have been providing HDX liquidity on Kraken for more than 9 months. Without this liquidity, the Kraken HDX markets would likely have much wider spreads, often in the 10–20% range and only a tiny fraction of the current order book depth.
My current LP impact:
That said, there is still significant room for improvement.
The main limitation today is not only inventory size, but inventory size under the constraint that the operation still needs to be at least slightly profitable after costs, including Hydration trading fees. With only my own capital, liquidity has to be managed defensively. Spreads cannot be pushed as low and visible depth cannot be made as strong, as they could be in an internalized Treasury-backed setup.
With Treasury-provided inventory, the liquidity function would be internalized for Hydration. The operation would no longer need to target the same margin a purely external market maker would require. It also would not need to calculate Kraken quotes as if Hydration trading fees must be recovered through wider spreads. Fees and execution costs would still be tracked for accounting and risk management, but they would no longer be treated as a required profit hurdle.
Current Kraken HDX market activity also shows the problem. Even after the latest HDX upmove, Kraken volume remained low and did not meaningfully recover alongside price. This suggests that Kraken is currently not functioning as a strong organic demand channel for HDX.
Low CEX volume is not neutral. It weakens external visibility, can become a delisting risk factor over time and hurts the chances of organic new exchange listings. New exchanges usually want to see existing market demand, liquid order books and credible trading activity. A thin Kraken market sends the opposite signal.
This proposal aims to address that by letting the Treasury provide inventory while keeping full ownership of it.
I request Treasury-owned inventory for active Kraken liquidity provision:
This inventory remains property of the Hydration Treasury at all times. It is not compensation, a grant, or a transfer of ownership.
The inventory will be actively used for market making, so balances may vary over time depending on fills, rebalancing and market conditions. Parts of this inventory will be converted to EUR/EURC. Governance may request the remaining inventory back at any time.
I request an operation fee of 1,200 HOLLAR per month.
The initial test period would run for 3 months, resulting in a total operation fee of 3,600 HOLLAR.
The strategy is to provide active liquidity on Kraken, especially within a ±2% band around the current market price.
The focus is on:
The strategy aims to quote at a minimal viable spread. Because this proposal internalizes the liquidity function for Hydration, the operation does not need to target the same profit margin as an external market maker. It also does not need to price Hydration trading fees into the Kraken spread as a required cost recovery component. This allows tighter spreads, deeper visible liquidity and a stronger focus on market quality.
I have continuously upgraded my market making stack over time and further improvements are planned. Latest key improvements include:
These upgrades are intended to make the operation safer, more reactive and more efficient while reducing the risk of funds getting stuck in failed or ambiguous states.
This proposal is limited to an initial 3-month test.
After the test period, the results should be reviewed based on:
Governance can then decide whether to continue, modify, expand, or stop the program.
The main risks are:
The limited 3-month duration keeps this as a controlled experiment.
I ask governance to approve:
A person provides HDX and USD liquidity on Kraken to improve trading. With own money, spreads are wide and depth is low. They ask the Treasury for 8 million HDX, 19,500 HOLLAR, and 19,500 USDC to use for liquidity. The Treasury keeps ownership. A 3-month test is proposed with a fee of 1,200 HOLLAR per month. The goal is tighter spreads, deeper order books, and better market visibility.