What is a market making bot A market making bot is an automated trading bot that continuously places buy and sell orders to provide liquidity to the market it earns profits from the bid ask spread trading incentives or protocol rewards simple example assume btc is trading at 100 usd the bot places buy 99.80 usd sell 100.20 usd if both orders are filled buy at 99.80 usd sell at 100.20 usd profit is 0.40 usd before trading fees the bot repeats this process thousands of times every day what does a market making bot do monitor market prices in real time place and cancel orders automatically adjust bid ask spreads based on market conditions manage token inventory reduce risk during volatile markets hedge positions across multiple exchanges market making bots in defi market making bots are widely used on both centralized exchanges and decentralized exchanges such as meteora dlmm uniswap v3 uniswap v4 raydium clmm orca whirlpools pancakeswap cl in defi these bots can automatically rebalance liquidity positions optimize lp ranges collect trading fees auto compound rewards withdraw or reposition liquidity when market conditions change