Market Makers in the Cryptocurrency Market: Mechanisms, Participants, and Their Market Impact

Guardians of Market Liquidity: The Core Role of Market Makers in Crypto Trading

In the 24/7 nonstop trading of cryptocurrency markets, a special group of participants quietly maintains the normal operation of the entire market—they are the market makers. These professional trading institutions or algorithmic trading systems continuously bridge buyers and sellers by providing real-time quotes and two-way orders, ensuring that any trader wanting to enter or exit a position can do so quickly.

The existence of market makers addresses the most critical pain points in crypto markets. Without their participation, traders would face wide bid-ask spreads, volatile prices, and difficulty executing large orders. Market makers serve as the “trading infrastructure,” employing algorithmic strategies and high-frequency trading technology to continuously place buy and sell orders at different price levels, forming liquidity pools. Whenever new traders enter or leave the market, transactions can be completed swiftly within the quotes provided by market makers.

How Crypto Market Makers Operate: From Algorithms to Profits

Basic Quote Mechanism

The profit source for market makers is relatively straightforward—profit from the bid-ask spread. For example, a market maker might simultaneously place a buy order at $100,000 and a sell order at $100,010 for Bitcoin (BTC), with the $10 difference representing their profit margin per trade. Although seemingly small, this spread accumulates over hundreds or thousands of trades, generating a steady income stream.

Trade Execution and Inventory Management

When a trader accepts the market maker’s sell price and completes a transaction, the market maker must immediately replenish new buy and sell orders to maintain market supply. They also hedge risk exposure by conducting cross-exchange hedging trades. This cross-exchange hedging ensures that even if a single market experiences extreme volatility, the market maker can keep losses within manageable limits.

Intelligent Trading Systems

Modern market makers rely almost entirely on automated trading bots and high-frequency trading (HFT) systems. These systems analyze key indicators such as liquidity depth, market volatility, and order flow within milliseconds, dynamically adjusting bid and ask quotes. They automatically sense market condition changes, narrowing spreads during rapid price increases to absorb more orders, and widening spreads during stable periods to prevent sudden risks.

Two Major Roles in the Crypto Trading Ecosystem: Market Makers vs. Take Liquidity Providers

The crypto trading market consists of two complementary types of participants: liquidity-providing market makers and liquidity-consuming takers. Their interaction forms the foundation of the entire market.

Characteristics of Market Makers:

• Provide liquidity via limit orders
• Profit by earning the bid-ask spread
• Behavior: wait for orders to trigger, actively engage with trading counterparts
• Risk: hold positions, requiring inventory management

Characteristics of Takers:

• Execute orders immediately at market prices
• Profit by predicting price movements and capturing spreads
• Behavior: act proactively, trade instantly
• Risk: market volatility, sensitive to timing

For example, when a trader wants to buy Bitcoin immediately at the current market price, they are “taking liquidity”—consuming the sell orders placed in advance by market makers. This action completes a trade and triggers the market maker’s mechanism to replenish new orders.

Leading Market Makers in Today’s Crypto Market

As of 2025, several top market makers dominate liquidity provision in the crypto space:

Wintermute: Global Cross-Chain Liquidity Provider

As a pioneer in algorithmic trading, Wintermute operates on over 30 public blockchains across more than 300 assets, managing approximately $237 million in assets. The company provides liquidity on more than 50 crypto exchanges worldwide, with a total trading volume approaching $6 trillion (as of November 2024).

Wintermute’s strength lies in its broad coverage—serving both centralized exchanges (CEX) and decentralized exchanges (DEX). However, this versatile positioning also has limitations, with relatively limited support for emerging or niche tokens.

GSR: Institutional-Grade Market Making and Investment Platform

GSR has been active in the crypto industry for over ten years, investing in more than 100 ecosystem projects and protocols, forming a comprehensive ecosystem investment map. The company mainly offers three services—market making, OTC trading, and derivatives trading, serving token issuers, institutional investors, miners, and other institutional clients.

GSR maintains liquidity on over 60 exchanges, but its service focus leans toward top-tier projects, with less support and flexible pricing for small- and mid-cap projects.

Amber Group: AI-Driven Trading Engine

Amber manages approximately $1.5 billion in trading capital, serving over 2,000 institutional clients, with a trading volume exceeding $1 trillion (as of February 2025). Known for its AI technology and risk control models, the company has established a robust compliance framework.

However, Amber’s high entry barriers and diversified business layout may make it less suitable for early-stage or small projects.

Keyrock: Data-Driven Trading Specialist

Founded in 2017, Keyrock executes over 550,000 trades daily across 85 exchanges and more than 1,300 markets. The company offers a full suite of solutions including market making, OTC, options trading, and treasury management.

Keyrock’s personalized service solutions are based on deep data analysis, allowing tailored strategies for different regulatory environments. Compared to industry giants, its reputation and capital scale are smaller, potentially offering more competitive commissions.

DWF Labs: Ecosystem Investment and Market Making Combo

DWF manages a portfolio of over 700 projects, including more than 20% of the top 100 projects on CoinMarketCap and over 35% of the top 1,000 projects. The firm provides spot and derivatives liquidity on more than 60 mainstream exchanges.

DWF’s advantage is its ability to conduct both investment and market making simultaneously, but its strict project review process and Tier-1 positioning also limit opportunities for smaller projects.

How Market Makers Empower Exchanges

Qualitative Enhancement of Liquidity Depth

Continuous two-way quotes from market makers create ample trading depth. This means even if someone wants to buy a large amount of Bitcoin at once, they can do so in smaller batches at relatively stable prices, avoiding sharp price increases. This is crucial for institutional investors seeking large-volume trades.

Effective Volatility Dampening

During market sentiment swings, market makers act as “stabilizers.” When panic-driven declines occur, their large buy orders provide support, preventing further free fall; during excessive euphoria, their sell orders suppress irrational surges. This automatic market regulation results in smoother price curves.

Efficient Price Discovery

By adjusting quotes in real-time to market information, market makers participate in the continuous formation of market prices. Their quotes essentially reflect real-time supply and demand, helping the market quickly find equilibrium and ensuring asset prices more accurately reflect their intrinsic value.

Lower Transaction Costs and Improved User Experience

Tight bid-ask spreads minimize slippage for traders. Widespread liquidity depth ensures quick order execution. This low-cost, high-efficiency trading experience attracts more retail and institutional clients, boosting exchange trading volume and fee revenue.

Risks Faced by Market Makers

Direct Market Risk Impact

Extreme volatility in crypto markets poses the greatest threat to market makers holding large positions. An “black swan” event could cause prices to drop over 50% within hours. If their hedging mechanisms are slow to respond, huge positions could incur significant losses.

Inventory Management and Position Risks

Market makers need to hold large amounts of crypto assets to meet trading demands. If asset prices plummet, their inventories could rapidly depreciate. This risk is especially pronounced in low-liquidity small-cap markets, where price swings are more intense.

System and HFT Vulnerabilities

Market makers rely on complex algorithmic systems. Software failures, network delays, or exchange API outages can prevent orders from being updated promptly, locking them into unfavorable quotes. There have been cases where system issues caused significant losses for market makers.

Regulatory Uncertainty and Compliance Pressure

The global regulatory framework for cryptocurrencies is still evolving, with significant differences across jurisdictions regarding market making activities. Some regions may classify market making as market manipulation and prohibit it. Sudden regulatory shifts can pose legal and operational risks for cross-border market makers. The cost of global compliance continues to rise.

Conclusion

Market makers have become an indispensable infrastructure in the crypto trading ecosystem. Their presence ensures market continuity, liquidity, and price efficiency, enabling both individual traders and institutional investors to operate in a relatively healthy trading environment.

However, the success of market makers also depends on precise risk management, stable technological systems, and a stable regulatory environment. As crypto markets mature, the role of market makers will become even more critical, while the challenges they face will grow more complex. Understanding how market makers operate helps traders and projects better identify market opportunities and mitigate potential risks.