Market Maker

A market maker is a firm or trader that continuously quotes both buy and sell prices for an asset, profiting from the spread between them while providing the liquidity other traders rely on. By always standing ready to take either side, market makers make it possible to trade instantly without waiting for a natural counterparty.

For example, a market maker on a BTC pair might quote a bid at $59,990 and an ask at $60,010. Buying from sellers at the bid and selling to buyers at the ask, it earns the $20 spread repeatedly while trying to keep its net position close to flat. Its main risk is inventory: accumulating an asset just as its price moves against them.

In crypto, professional market-making firms operate across major exchanges, and token projects often contract them to keep their markets liquid. In DeFi, automated market makers (AMMs) replace the firm with a pricing formula and pooled deposits from ordinary users. Exchanges encourage market making with maker rebates and fee discounts. A common misconception is that market makers profit by moving prices against retail traders; their core business is earning many small spreads on huge volume while staying directionally neutral — a market maker taking big directional bets is doing something else.