Driving liquidity and efficiency: The essential role of crypto market makers

cointelegraph.com:

As the cryptocurrency market continues to mature, the importance of market makers in maintaining liquidity and stability has grown respectively. Similar to the worldwide trend of increased regulation, market makers are acquiring prominence in the evolving cryptocurrency landscape.

By partnering with exchanges, such as Binance, Coinbase, KuCoin and others, market makers try to reduce spreads in highly liquid markets, benefiting both retail and institutional participants. Cointelegraph Research has compiled a database of about 50 crypto market makers operating worldwide, with detailed information on their activities and focus.

Market makers play a crucial role in digital asset markets by absorbing sudden fluctuations in supply and demand, stabilizing prices and providing a more predictable trading environment.

However, it is also true that market makers may not always be effective. For example, factors such as speculative trading, limited liquidity and sudden market movements can make it challenging for market makers to mitigate price volatility.

Explore Cointelegraph Research Market Makers Database here

Market makers maintain a presence in the market by simultaneously offering competitive bids and asking prices for a given cryptocurrency. To illustrate, let us consider a scenario where a market maker places a bid to purchase a cryptocurrency at a price of $99 and concurrently sets an ask price to sell the same cryptocurrency at $100. The disparity between these bid and ask prices, commonly referred to as the spread, represents the profit margin captured by the market maker.

Market makers employ advanced algorithmic trading strategies to optimize their operations. These strategies involve analyzing market data, identifying