Market maker
A market maker is a trader that offers buy and sell prices for crypto at the same time. This can make it easier for others to buy or sell.
What is a market maker?
A market maker aims to buy crypto at a certain price and sell it for a slightly higher price. The difference between those two prices is called the bid-ask spread.
On a trading platform, a market maker usually places orders on both sides. An order is an offer to buy or sell. If someone accepts the price, the trade can go through.
A market maker isn't a crypto exchange. The crypto exchange brings buyers and sellers together, while the market maker also trades on its own.
An example of a market maker
Suppose a market maker wants to buy a cryptocurrency for €99 and sell it for €101. Someone sells one coin to the market maker for €99. Then someone else buys that coin for €101.
The gross difference is €2. Fees and potential losses from price movements still need to be deducted.
Why is a market maker important in crypto?
Market makers can help increase liquidity. This means there are more opportunities to buy and sell. As a result, an order may have less impact on the price, especially when it's a smaller order.
You might see the term in news about a new token listing on a trading platform. A crypto project may make an agreement with a trading firm to support trading in the token.
A market maker doesn't guarantee a stable price or that every order will be filled. During sharp price movements, bid and ask prices may move further apart, and fewer orders may be available. Market making is also not the same as market manipulation.
