What Are Cryptocurrency Market Makers?
An introduction to cryptocurrency market makers, how they provide liquidity, and why they matter for trading in onchain and centralized markets.
What Are Market Makers?
Market makers are participants in financial markets whose role is to provide liquidity.
In simple terms, they make sure that:
- you can buy when you want to buy
- you can sell when you want to sell
- trades execute quickly and at predictable prices
Without market makers, many markets would be slow, illiquid, and expensive to trade.
Why Liquidity Matters
Liquidity refers to how easily an asset can be bought or sold without significantly affecting its price.
| High Liquidity | Low Liquidity | |----------------|---------------| | Tighter price spreads | Wider spreads | | Faster execution | Delayed execution | | Lower slippage | Higher price impact | | More stable markets | Increased volatility |
Market makers exist to reduce the problems caused by low liquidity.
What Do Market Makers Actually Do?
Market makers continuously place:
- buy orders (bids)
- sell orders (asks)
for a given trading pair.
If there is no natural buyer or seller at a given moment, the market maker steps in and becomes the counterparty. This keeps the market moving even when trading activity is low.
By doing this across many price levels, market makers help maintain:
- active order books
- narrow bid-ask spreads
- consistent pricing
Who Are Market Makers?
In crypto, market makers are typically:
- specialized trading firms
- quantitative funds
- liquidity providers operating algorithmically
They manage large amounts of capital and infrastructure to quote prices continuously.
At scale, market making requires:
- significant capital reserves
- fast execution systems
- sophisticated risk management
Market Makers in Centralized vs Onchain Markets
Centralized Exchanges (CEXs)
On centralized exchanges:
- market makers place orders in traditional order books
- exchanges often incentivize them with reduced fees or rebates
- market makers and exchanges operate as separate entities
This separation helps avoid conflicts of interest.
Onchain and Decentralized Markets (DEXs)
Onchain markets work differently.
Instead of traditional order books, many decentralized exchanges use:
- automated market makers (AMMs)
- liquidity pools
In these systems:
- liquidity is provided by smart contracts
- prices adjust automatically based on supply and demand
- anyone can provide liquidity by depositing assets
While the mechanics differ, the goal is the same: enable continuous trading.
Benefits of Market Makers
Better Trading Experience
By keeping spreads tight and order books active, market makers:
- reduce trading costs
- improve execution quality
- make markets more predictable
Market Stability
Market makers help smooth price movements by:
- absorbing temporary imbalances
- providing liquidity during volatile periods
- maintaining price continuity
This reduces extreme price jumps caused by thin liquidity.
Support for Emerging Assets
Many tokens would be difficult to trade without market makers.
By providing liquidity for newer or lower-volume assets, market makers:
- increase trading accessibility
- improve price discovery
- help markets develop
How Market Makers Earn Revenue
Bid-Ask Spread
Market makers buy slightly lower and sell slightly higher.
The difference between:
- the bid price (what they pay to buy)
- the ask price (what they charge to sell)
is called the spread. This spread is the market maker's primary source of profit.
Fees and Incentives
In some cases:
- exchanges pay market makers for providing liquidity
- market makers receive reduced trading fees or rebates
These incentives encourage consistent liquidity provision.
Competition Benefits Traders
In active markets:
- multiple market makers compete
- spreads become narrower
- traders get better prices
If spreads are too wide:
- traders trade less
- volumes drop
- market makers earn less
This creates natural pressure toward efficient pricing.
Market Makers and Traders
Market makers are not opponents to traders.
They:
- enable traders to enter and exit positions easily
- reduce friction in the market
- support price discovery
Healthy markets depend on both active traders and effective liquidity providers. The relationship is symbiotic — traders need liquidity, and market makers need trading volume.
How This Relates to Briz
Briz gives users access to onchain markets, where liquidity is provided by:
- traditional market makers
- automated onchain mechanisms (AMMs)
- liquidity pools
Understanding how market makers work helps you:
- interpret prices more accurately
- understand spreads and slippage
- make more informed trading decisions
When you trade on Briz, you interact with these liquidity systems directly — settled onchain, in your own wallet.
Summary
Market makers are one of the least visible — but most important — parts of crypto markets.
| Function | Impact | |----------|--------| | Provide continuous liquidity | Markets stay active | | Maintain tight spreads | Trading costs stay low | | Absorb temporary imbalances | Prices stay stable | | Support new assets | Markets can develop |
Whether trading on centralized exchanges or onchain platforms, market makers are the infrastructure that makes liquid, functional markets possible.
Ready to try self-custody in onchain economy?
Briz makes it easy to hold your own crypto and other assets with the simplicity of a traditional app.
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