Market Maker in Cryptocurrency Trading: The Foundation of Liquidity and Market Stability

Crypto traders often face the challenge of executing orders quickly without significantly impacting the asset’s price. Behind this trading fluidity is the work of professional market makers—specialists who continuously maintain liquidity in the market. Market makers place simultaneous buy and sell orders, creating opportunities for other market participants to trade without delays. This mechanism is critically important for the digital asset ecosystem, ensuring not only fast execution but also price stability.

Who is a market maker and why is he necessary

A market maker is a specialized trader, investment institution, or trading firm that uses advanced algorithms to continuously place buy and sell orders for crypto assets. Unlike regular traders, who seek to maximize profit from the spread between entry and exit prices, a market maker earns income from the narrow spread between the buy and sell prices.

Cryptocurrency markets operate 24/7, unlike traditional financial markets. Without the constant presence of market makers, traders would face the following problems:

• Wide spreads between bid and ask prices, increasing trading costs
• Increased volatility due to lack of liquidity
• Inability to quickly execute large orders without significant slippage

Major financial institutions, hedge funds, and specialized trading firms dominate this space, although retail traders can also participate in market making by placing limit orders on exchanges on a smaller scale.

How it works: how a market maker supports the market

Market maker operations are based on a simple but effective scheme. Let’s consider a scenario with Bitcoin (BTC), currently priced around $68,260:

Order placement and execution process:

A market maker simultaneously places:

• A buy order for BTC at $68,250
• A sell order for BTC at $68,270

This $20 spread between bid and ask prices provides a profitable margin. When many such trades accumulate throughout the day (thousands or millions of orders), a steady stream of income is generated.

Inventory management and risk reduction:

Market makers don’t just place orders—they actively manage their positions. After an order is filled, the market maker immediately places new orders. They employ several strategies:

• Hedging positions across multiple exchanges to minimize price fluctuation impacts
• Using high-frequency trading (HFT) to execute thousands of trades per second
• Adjusting spreads based on volatility: narrower during calm markets, wider during uncertain times

Automated algorithms:

Modern market makers rely on sophisticated trading bots that analyze:

• Order book depth
• Current asset volatility
• Incoming order flow
• Conditions on related markets

Based on this analysis, the algorithm dynamically adjusts buy and sell prices in real time, ensuring optimal pricing.

Market maker vs. market taker: the fundamental difference

In crypto trading, there are two types of participants constantly interacting:

Market maker — liquidity provider:

• Places limit orders that remain in the order book until filled
• Earns passive income from the spread
• Example: placing a buy order for BTC at $68,250 and a sell order at $68,270
• Pays lower fees (or even receives rebates) from the exchange for adding liquidity

Market taker — liquidity consumer:

• Immediately executes existing orders at the current market price
• Actively removes liquidity from the market
• Example: a trader urgently wants to buy BTC at any available price and accepts the market maker’s ask at $68,270
• Pays higher fees for liquidity removal

Balance as the foundation of a healthy market:

Interaction between market makers and takers creates a dynamic system:

• Market makers ensure a constant supply on both sides
• Takers generate trading activity by matching these offers
• Result: narrow spreads, deep order books, minimal slippage for all participants

Leading market-making firms in 2025-2026

Wintermute: global presence at scale

Wintermute remains one of the largest algo-trading firms in the crypto industry. As of early 2025, this company managed approximately $237 million in assets across more than 30 blockchains, including 300+ different cryptocurrencies. Wintermute provides liquidity on over 50 crypto exchanges worldwide, with a total trading volume exceeding $6 trillion.

Key advantages:

• Unprecedented coverage of both centralized (CEX) and decentralized (DEX) exchanges
• Use of advanced algorithmic trading strategies
• Established reputation and reliability in the industry

Limitations:

• Intense competition with other major market makers
• Preference for working with liquid and well-known tokens
• Possible challenges supporting early-stage projects

GSR: experience and service diversification

GSR is a leader thanks to over a decade of experience in crypto trading. The company offers a comprehensive range of services: market making, OTC trading, derivatives trading, serving token issuers, institutional investors, miners, and exchanges.

By early 2025, GSR had invested capital into over 100 leading projects and protocols within the Web3 ecosystem, demonstrating its active role as a multi-profile investor. The firm provides liquidity on more than 60 crypto exchanges globally.

Main strengths:

• Deep liquidity support across various platforms
• Long-standing presence and established relationships in the crypto industry
• Specialization in liquidity management during token launches

Potential downsides:

• Focus mainly on large and institutional projects
• High costs for custom solutions for smaller projects

Amber Group: AI-driven trading approach

Amber Group is known for applying advanced trading strategies using artificial intelligence. As of early 2025, the company managed around $1.5 billion in trading capital, serving over 2,000 institutional clients. Amber Group’s total trading volume on supported exchanges exceeded $1 trillion.

Advantages:

• Use of machine learning and AI to optimize trading
• Comprehensive financial services with a focus on risk management
• High compliance standards

Disadvantages:

• High entry requirements and minimum thresholds for new clients
• Broad focus on many financial services, which may dilute specialization in market making
• Not always accessible for early-stage projects

Keyrock: specialization in micro-ecosystems

Founded in 2017, Keyrock specializes in algorithmic trading. As of February 2025, the firm processed over 550,000 daily trades across 1,300+ markets and 85 exchanges. Keyrock offers services including market making, OTC trading, options desks, treasury solutions, and liquidity pool management.

Pros:

• Data-driven approach to liquidity distribution
• Flexible solutions for various regulatory jurisdictions
• Support for both spot and derivatives markets

Cons:

• Smaller scale compared to industry giants
• Less recognition among major projects
• Potentially higher fees for custom solutions

DWF Labs: portfolio approach with investments

DWF Labs combines market making with investment activities. As of February 2025, DWF Labs managed a portfolio of over 700 projects, supporting more than 20% of Top-100 CoinMarketCap projects and 35% of Top-1000. The firm provides liquidity on over 60 leading crypto exchanges.

Strengths:

• Provides significant market liquidity
• Offers competitive OTC trading solutions
• Actively invests in promising early-stage projects

Weaknesses:

• Mainly works with Tier 1 projects and exchanges
• Strict project evaluation criteria

All these firms employ advanced algorithms, deep data analytics, and modern technologies to optimize liquidity, playing a critical role in supporting new token launches.

Benefits of market makers for crypto exchanges

Increasing liquidity and trading volumes

Market makers constantly place orders, ensuring sufficient trading volume and depth in the order book. This allows large trades to be executed without sharp price swings. For example, attempting to buy 10 BTC without a market maker could significantly raise the price due to a lack of sell orders, whereas with market makers, the operation proceeds smoothly.

Stabilizing volatility

Crypto markets are known for their volatility, especially altcoins with low liquidity. Market makers adjust spreads based on conditions: during downturns, they act on the buy side to prevent further drops; during overheating, they maintain active supply. This role is crucial for smoothing out market fluctuations.

Improving market price discovery

Market makers facilitate fair price discovery, where prices are determined by real supply and demand. Results include:

• Narrow bid-ask spreads, reducing transaction costs
• Fast execution of trades without delays

Attracting new traders and increasing revenue

Liquid markets attract both retail and institutional traders. More trades mean higher commissions for exchanges. Additionally, exchanges often attract market makers for new token listings, providing immediate liquidity for freshly launched assets.

Risks and challenges faced by market makers

Despite their vital role, market makers face significant risks:

Market volatility and position losses: Crypto markets can change direction sharply. If the price moves against the market maker faster than he can adjust orders, losses occur. Holding large positions in low-liquidity conditions is especially risky.

Technological risks: Market makers depend on algorithms and HFT systems. Technical failures, cyberattacks, or data delays can lead to orders being executed at undesired prices, especially in fast-moving markets.

Regulatory uncertainty: Cryptocurrency regulation varies by country and is constantly evolving. In some jurisdictions, market making could be considered market manipulation. Compliance costs can be substantial for global operators.

Inventory risks: Market makers hold large amounts of crypto to ensure liquidity. A sudden drop in asset value can lead to significant losses.

Summary: the role of market makers in the development of the crypto ecosystem

A market maker is a fundamental component of a healthy trading ecosystem. Their continuous activity in the market provides:

• Liquidity: traders can enter and exit positions without delays
• Stability: narrow spreads and predictable prices
• Efficiency: fair price discovery based on real supply and demand

As cryptocurrency trading evolves, the role of market makers will only strengthen. However, it is important to understand that they are not market saviors but participants who profit from providing a valuable service. Their success depends directly on maintaining a balance between profitability and fostering a healthy, safe, and fair market for all participants in the crypto ecosystem.