Who is market maker in the cryptocurrency world and why is it so important?

If you trade cryptocurrencies, you've probably noticed that some trading pairs are "live," while others look like an abandoned bar after closing—zero movement, wide spreads, and the price bounces like a ball.

Behind all this lies one word: liquidity.

And who provides it? Market makers.

🔹 What does a market maker do?

A market maker is a participant (a company or algorithm) that actively places buy and sell orders on a cryptocurrency exchange.

Their job is to maintain a liquid, stable, and attractive market.

In practice:

they buy and sell the same token in short intervals,

they earn on the difference (spread) between the bid and ask price,

they help other traders always find the other side of the transaction.

🔹 A simple real-life example (i.e., from an exchange)

Imagine a new project launching the MOONTOKEN token 🚀.

Without a market maker, it would look like this:

there are no orders in the book,

the first buy immediately raises the price by 10-20%,

no one is sure what the "real" value of the token is.

Now the market maker comes in:

it places buy orders at $0.99 and sell orders at $1.01,

it updates them automatically as the market moves,

it maintains a 2-cent spread, making trading liquid.

This makes MOONTOKEN tradable, and users can easily enter and exit positions.

It's a bit like a cashier who always has change – without them, transactions would be cumbersome.

🔹 Why exchanges love market makers

Cryptocurrency exchanges need liquidity like oxygen. Without it:

investors would have trouble executing orders,

prices would appear chaotic,

the market would be unattractive to new participants.

That's why many platforms collaborate with market-making companies, offering them:

lower transaction fees,

premiums for maintaining liquidity,

contracts for specific trading pairs.

It's a win-win: the exchange has liquidity, and the market maker earns on the price difference.

🔹 Market makers in DeFi – or robots do the work 🤖

In decentralized finance (DeFi), the role of the market maker is played by an automated market maker (AMM) – a smart contract that calculates prices and handles trading itself.

Examples? Uniswap, PancakeSwap, SushiSwap, and many others.

Here, users provide liquidity by depositing their tokens into a liquidity pool. Anyone who adds funds becomes a mini-market maker and earns a portion of the commission from every transaction in this pool.

In other words, in DeFi, you can be a market maker.

🧠 For the curious: how does it work "under the hood"?

This is where the real magic of algorithmic trading begins.

Market makers don't act "by heart"—they use mathematics, automation, and risk models. Here's how it works in practice 👇

🔸 1. Maintaining the Spread

The market maker sets a target spread, for example, 0.2% of the market price.

Its algorithm monitors the order book and updates prices in real time to always have bids and offers close to the market price.

If the price changes, the bot immediately shifts its orders.

🔸 2. Position Management (Hedging)

Market makers often trade on several exchanges simultaneously. If someone buys 10 BTC from them on one platform, they can immediately sell 10 BTC on another to balance the position.

This is called hedging, which protects them from losses if the market moves sharply in one direction.

🔸 3. Arbitrage

Sometimes the same cryptocurrency has different prices on different exchanges.

A market maker can:

buy cheaper on one platform,

sell more expensive on another,

and profit from the difference (without market risk).

This is arbitrage, which also helps equalize prices between exchanges.

🔸 4. Risk and Algorithms

A good market maker must control:

volume risk (i.e., excessively large positions),

volatility risk (when prices jump too quickly),

and liquidity (does the market have sufficient funds to cover orders).

That's why most market makers use advanced algorithms based on statistics and machine learning, which automatically adapt their strategy to market conditions.

🧩 Summary

Market makers are the invisible force that keeps exchanges running smoothly, prices stable, and trading possible 24/7.

In centralized markets, this is done by professional firms.

In DeFi, anyone can become one by adding liquidity to the pool.

So next time you fill an order in a split second, remember that somewhere on the other end (or working in the background) there's a market maker who made it possible.

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