A market maker is an entity or trader that continuously provides buy and sell orders for a particular asset—such as BTC or HOME—in order to facilitate trade execution.
Simply put:
They place a buy price: the bid/buy price.
And they place a sell price: the ask/sell price.
The difference between the two prices is called the spread. It can be one of the sources of their profits, along with incentive programs some platforms offer for providing liquidity.
Simplified example:
If a market maker places a buy order at 100 USDT and a sell order at 100.20 USDT, it helps create a buyer and a seller close to the market price. This can make trading faster and reduce the spread, especially in liquid markets.
Difference from a regular trader:
A regular trader usually expects the price to rise or fall. In contrast, a market maker’s primary focus is providing liquidity, managing asset inventory, and handling the risks of price movements in the process.
But market makers are not without risk: if the price moves quickly in one direction, they may end up holding an asset whose value drops, or selling an asset before its price rises.
$DOLO
$KERNEL
$XPL
Simply put:
They place a buy price: the bid/buy price.
And they place a sell price: the ask/sell price.
The difference between the two prices is called the spread. It can be one of the sources of their profits, along with incentive programs some platforms offer for providing liquidity.
Simplified example:
If a market maker places a buy order at 100 USDT and a sell order at 100.20 USDT, it helps create a buyer and a seller close to the market price. This can make trading faster and reduce the spread, especially in liquid markets.
Difference from a regular trader:
A regular trader usually expects the price to rise or fall. In contrast, a market maker’s primary focus is providing liquidity, managing asset inventory, and handling the risks of price movements in the process.
But market makers are not without risk: if the price moves quickly in one direction, they may end up holding an asset whose value drops, or selling an asset before its price rises.
$DOLO
$KERNEL
$XPL