Market makers are essential in maintaining liquidity across financial and crypto markets. Their core function is to ensure sufficient supply and demand for assets, enabling smooth and quick trade execution. By setting bid and ask prices and stepping in as buyers or sellers when no counterparty is available, they keep markets active and efficient.
In crypto, market makers help exchanges maintain deep order books and stable trading environments. While often large financial institutions provide this service, some specialized firms and individuals also act as market makers. To avoid conflicts of interest, it’s important that the exchange and the market maker operate independently.
Benefits for Exchanges
Market makers increase trading efficiency by narrowing bid-ask spreads, ensuring continuous price stability, and boosting liquidity. This attracts more traders, expands customer bases, and raises trading volumes. By supporting illiquid tokens, they also enhance visibility and investor confidence while reducing the risk of manipulation.
How Market Makers Earn
Their revenue mainly comes from the bid-ask spread—the small difference between buying and selling prices. A narrow spread favors traders, while a wider spread increases profits for the market maker. They may also receive service fees from exchanges, adding to their income.
Through liquidity, stability, and competitive spreads, market makers play a vital role in strengthening both traditional and crypto markets.
