What Is a Market Maker in Crypto Trading, and How Does It Work?

Market makers are essential for liquidity in the crypto market, facilitating trades by continuously placing buy and sell orders. Learn how market makers work, their impact on exchanges, and the risks involved in maintaining market stability.

Market makers play a pivotal role in ensuring liquidity and stability within the highly dynamic crypto trading landscape. They facilitate smooth transactions, maintain market efficiency, and contribute significantly to the overall health of the crypto ecosystem. Without market makers, traders would face challenges such as wide bid-ask spreads, increased volatility, and difficulties in executing large orders. Their continuous presence in the market ensures that assets can be bought or sold promptly, fostering a more predictable and reliable trading environment.

Market makers employ sophisticated algorithms and trading strategies to provide liquidity. By placing simultaneous buy and sell orders, they ensure that there is always a counterparty available for traders looking to enter or exit positions. This constant activity not only stabilizes prices but also narrows the bid-ask spread, making trading more cost-effective for participants. Moreover, market makers play a crucial role in price discovery, helping the market find a consensus on asset values through their continuous quoting.

This article delves into the concept of market makers in crypto, their operations, distinctions from market takers, notable market makers in 2025, their benefits to exchanges, associated risks, and concludes with key takeaways.

A market maker in the cryptocurrency ecosystem is a specialized trader, institution, or algorithmic trading firm that actively provides liquidity by continuously placing both buy (bid) and sell (ask) orders for a specific asset. This dual-sided activity ensures that the market remains efficient, enabling traders to execute transactions instantly without waiting for a matching order from another trader.

Without market makers, crypto trading would become highly inefficient, leading to wide bid-ask spreads, increased price volatility, and difficulty in executing large trades. By maintaining a steady presence in the order book, market makers help stabilize asset prices, reduce price slippage, and enhance overall market efficiency.

Unlike retail traders who aim to buy low and sell high, market makers profit primarily from the bid-ask spread—the small difference between the price at which they buy and sell. Their role is crucial in both centralized exchanges (CEXs) and decentralized exchanges (DEXs), ensuring that cryptocurrencies remain liquid and easily tradable.

Large financial institutions, hedge funds, and specialized trading firms like Wintermute, GSR, and DWF Labs dominate the market-making space. However, some retail traders also engage in market-making by placing limit orders on exchanges, contributing to liquidity on a smaller scale.

Role of market makers in crypto trading | Source: Keyrock

Market makers function as liquidity providers by continuously placing buy and sell orders at various price levels. Their core objective is to maintain a balance between supply and demand, ensuring that assets can be traded with minimal price disruption.

The Market Making Process

Posting Buy and Sell Orders:

A market maker places a bid to buy Bitcoin (BTC) at $100,000 and an ask to sell BTC at $100,010.
This creates a $10 bid-ask spread, which serves as their profit margin.

Filling Orders Efficiently:

If a trader accepts the $100,010 selling price, the market maker sells the BTC and replenishes the order book with new buy/sell orders.
The spread accumulates over thousands of trades, forming a steady revenue stream for market makers.

Managing Risk and Inventory:

Market makers don’t just execute trades—they also manage inventory by hedging their positions across multiple exchanges to minimize exposure to price fluctuations.
Some firms use high-frequency trading (HFT) algorithms to execute thousands of trades per second, ensuring they quickly adjust to market changes.

Automated Trading Strategies:

Most modern market makers use algorithmic trading bots to adjust their orders dynamically based on real-time market conditions.
These bots analyze liquidity depth, volatility, and order flow to determine optimal pricing for bid-ask spreads.

The Importance of Market Makers in Crypto

Crypto markets are known for their 24/7 trading cycles, unlike traditional stock markets that have designated trading hours. Market makers ensure that liquidity remains available around the clock, reducing the risk of extreme price swings caused by low trading volumes.

Additionally, market makers support new token listings by providing initial liquidity, which is critical for attracting traders to newly launched crypto assets. Many projects partner with established market-making firms to maintain a healthy trading environment for their tokens.

By bridging the gap between buyers and sellers, market makers create a more stable and efficient trading landscape, making cryptocurrency markets more accessible to retail and institutional investors alike.

Market makers vs. market takers | Source: SecuX

Cryptocurrency trading relies on two main types of participants: market makers and market takers. Both play an essential role in maintaining a functional and liquid trading environment.

Market Makers: The Liquidity Providers

Market makers add liquidity to the market by placing limit orders—orders to buy or sell an asset at a predetermined price. These orders are not immediately executed but instead sit in the exchange’s order book, waiting for a counterparty to match them.

Example: A market maker places a buy order for Bitcoin (BTC) at $100,000 and a sell order at $100,010. This ensures that if a trader wants to buy BTC, there is already an available sell order at a reasonable price.
Because market makers provide continuous order flow, they reduce price gaps and maintain a tight bid-ask spread, making trading more cost-effective.

Market Takers: The Immediate Traders

Market takers are traders who execute orders immediately at the current market price. Unlike makers, they do not wait for their order to be matched later; instead, they remove existing liquidity from the market by accepting an available bid or ask price.

Example: A trader wants to buy BTC instantly at the current price of $100,010. By doing so, they fill the market maker’s existing sell order, completing the transaction immediately.

The Balance Between Makers and Takers in the Crypto Market

The interaction between market makers and takers creates a stable and liquid trading environment.

Market makers ensure that there are always buy and sell orders available, allowing traders to execute their trades smoothly.
Market takers provide trading activity and demand, ensuring that market makers' orders are consistently matched.
A well-balanced maker-taker system reduces price slippage, increases order book depth, and keeps transaction costs low for all market participants.

As of 2025, several crypto market makers have distinguished themselves through their contributions to liquidity and market stability:

Wintermute

Wintermute cumulative trading volume | Source: Wintermute

Wintermute is a leading algorithmic trading firm specializing in providing liquidity across various cryptocurrency exchanges. The firm is known for its advanced trading strategies and significant market presence. As of February 2025, Wintermute managed approximately $237 million in over 300 on-chain assets across 30+ blockchains, reflecting its substantial role in the crypto market. Wintermute provides liquidity on over 50 crypto exchanges worldwide, with a cumulative trading volume of nearly $6 trillion as of November 2024.

Pros:

Wide coverage across centralized and decentralized exchanges.
Advanced algorithmic trading strategies.
Strong industry reputation and reliability.

Cons:

High competition from other top-tier market makers.
Less focused on smaller or niche tokens.
May not be the best fit for very early-stage projects.

GSR

GSR is a prominent cryptocurrency trading firm and liquidity provider with over a decade of deep crypto market expertise. The firm specializes in offering services such as market making, over-the-counter (OTC) trading, and derivatives trading, catering to a diverse clientele that includes token issuers, institutional investors, miners, and leading trading venues.

As of February 2025, GSR has invested in more than 100 leading companies and protocols within the cryptocurrency and Web3 ecosystem, reflecting its active role as a multi-stage investor. GSR operates globally, providing liquidity across over 60 cryptocurrency exchanges and supporting the digital asset ecosystem through its comprehensive suite of services.

Pros:

Deep liquidity support across various exchanges.
Long-established in the crypto industry.
Focus on token launches and ongoing liquidity management.

Cons:

Mainly targets larger projects and institutional traders.
Custom solutions can be costly for smaller projects.
Service costs may be high for smaller businesses.

Amber Group

Amber Group is a leading cryptocurrency trading firm specializing in providing liquidity across various digital asset markets. The firm is known for its advanced trading strategies and significant market presence. As of February 2025, Amber Group managed approximately $1.5 billion in trading capital for over 2,000 institutional clients, reflecting its substantial role in the crypto market. Amber Group provides liquidity on numerous crypto exchanges worldwide, with a cumulative trading volume exceeding $1 trillion as of February 2025.

Pros:

AI-driven, compliance-focused services.
Comprehensive suite of financial services.
Strong focus on risk management.

Cons:

High entry requirements.
Focus across many areas, not just market making.
May not cater to smaller or emerging projects.

Keyrock

Keyrock is a leading algorithmic trading firm specializing in providing liquidity across various cryptocurrency exchanges. The firm is known for its advanced trading strategies and significant market presence. As of February 2025, Keyrock managed over 550,000 daily trades across more than 1,300 markets and 85 exchanges, reflecting its substantial role in the crypto market. Founded in 2017, Keyrock offers a range of services, including market making, OTC trading, options desk, treasury solutions, liquidity pool management, and ecosystem development, catering to a diverse clientele in the digital asset industry.

Pros:

Algorithmic trading and liquidity optimization.
Customized solutions for different regulatory environments.
Data-driven approach ensures optimal liquidity distribution.

Cons:

Limited resources compared to larger market makers.
Less well-known compared to industry giants.
May have higher fees for bespoke services.

DWF Labs

DWF Labs is a leading Web3 investment and market-making firm specializing in providing liquidity across various cryptocurrency exchanges. The firm is known for its advanced trading strategies and significant market presence. As of February 2025, DWF Labs managed a portfolio of over 700 projects, supporting more than 20% of CoinMarketCap's Top 100 projects and over 35% of the Top 1000, reflecting its substantial role in the crypto market. DWF Labs provides liquidity on over 60 top crypto exchanges worldwide, trading in both spot and derivatives markets.

Pros:

Provides market liquidity.
Competitive OTC trading solutions.
Invests in early-stage projects.

Cons:

Works only with Tier 1 projects and exchanges.
Strict project assessment procedures.

These firms utilize advanced algorithms, deep data analytics, and cutting-edge technology to optimize liquidity and minimize trading inefficiencies, playing a critical role in supporting new token launches and fostering healthy, transparent markets.

Market makers play a critical role in ensuring efficient market operations on centralized and decentralized exchanges. Their participation leads to higher trading volume, price stability, and improved user experience.

1. Enhanced Liquidity

Market makers’ role in providing liquidity | Source: Keyrock

Market makers continuously place buy and sell orders, ensuring that an exchange has sufficient trading volume and order book depth. This allows large trades to be executed smoothly without causing drastic price swings.

Example: Without market makers, an attempt to buy 10 BTC might significantly increase the price due to lack of sell orders. With market makers, there is enough liquidity to absorb the trade without major price fluctuations.

2. Reduced Volatility

Crypto markets are highly volatile, but market makers help stabilize prices by consistently adjusting their bid-ask spreads. This prevents extreme fluctuations, especially in smaller altcoin markets with lower trading volumes.

During market crashes, market makers provide buy-side support to prevent further price collapses.
During bull runs, they reduce excessive price spikes by maintaining an active supply of assets.

3. Improved Market Efficiency

Market makers facilitate price discovery, meaning that asset prices are determined by real supply and demand rather than speculation or illiquid trading conditions. This leads to:

Narrower bid-ask spreads, reducing costs for traders.
Faster trade execution, allowing traders to enter and exit positions without delays.

4. Attraction of Traders & Increased Exchange Revenue

Liquid markets attract retail and institutional traders, leading to increased trading volume.
More trades mean higher trading fee revenue for exchanges.
Exchanges often partner with market makers to support new token listings, ensuring immediate liquidity for newly listed assets.

By ensuring a stable, liquid, and efficient market, market makers help exchanges remain competitive and attractive to traders worldwide.

While market makers provide significant benefits, their operations also come with financial, technological, and regulatory risks.

Market Volatility: Rapid price swings in the crypto market can lead to unexpected losses for market makers, especially when they are holding large positions. If the market moves against them too quickly, they may not be able to adjust their orders in time, leading to negative returns.
Inventory Risk: Market makers hold large amounts of cryptocurrencies to ensure liquidity. If the value of these holdings drops sharply, they could incur significant losses. This is particularly risky in low-liquidity markets, where price swings are more pronounced.
Technological Risks: Market makers rely on advanced algorithms and high-frequency trading (HFT) systems to execute trades efficiently.

Technical failures, system errors, or cyberattacks could disrupt their trading strategies, leading to financial losses.
Latency issues can cause orders to be executed at undesirable prices, especially in fast-moving markets.

Regulatory Risks: Crypto regulations vary by country, and sudden legal changes can impact market-making activities. Some jurisdictions may classify market-making as market manipulation, leading to legal consequences. Compliance costs can be high for market makers operating in multiple global markets.

Market makers are integral to the cryptocurrency trading ecosystem, providing the necessary liquidity and stability that facilitate efficient and seamless trading experiences. Their continuous presence in the market ensures that traders can execute orders promptly, contributing to overall market health.

While market makers are essential for liquidity, stability, and efficiency, they must navigate market risks, regulatory changes, and technological challenges. As crypto trading evolves, the role of market makers will continue to be vital in shaping a more mature and accessible digital asset market.

However, it's essential to recognize the risks they face and the critical role they play in maintaining a balanced and efficient crypto market.

What Is a Market Maker in Crypto Trading, and How Does It Work?