Who is a market maker in cryptocurrency trading and why is he critical to the market?

Market makers are specialized traders or firms that continuously place simultaneous buy and sell orders for crypto assets. Their main function is to provide liquidity to the market, ensuring smooth and efficient trading. Without them, crypto traders would face significant problems: wide spreads between bid and ask prices, sudden volatility jumps, and difficulty executing large orders.

The role of market makers in the crypto market today is indispensable. They provide round-the-clock liquidity ( unlike traditional stock markets with fixed trading hours), stabilize asset prices, and help new tokens gain the necessary trading activity when they launch on exchanges. Major financial institutions, hedge funds, and specialized companies like Wintermute, GSR, DWF Labs, and Amber Group dominate this market.

How a Market Maker Works: Practical Mechanism

Market makers operate as continuous liquidity providers, placing orders at various price levels. Let’s consider a specific example with Bitcoin (BTC).

Typical trading cycle of a market maker

Spreading: The market maker places a buy order for Bitcoin at $87,000 and a sell order at $87,020. The difference in $20 — is their profit margin, which they earn on each completed trade.

Order execution: When a regular trader accepts the offer to sell BTC at $87,020, the market maker instantly executes this trade. They then immediately place new buy and sell orders to maintain their presence in the order book.

Profit accumulation: Through thousands of such microtransactions during the day, the market maker collects a steady stream of income from spreads, without betting on the direction of the price movement.

Position management: Modern market makers use algorithmic trading bots that dynamically adjust spreads based on volatility, liquidity depth, and overall order flow in the market. Some firms employ high-frequency trading (HFT), executing thousands of trades per second.

Risk Management Techniques

Market makers do not just place orders—they also actively manage their crypto asset inventories. They hedge positions across multiple exchanges to minimize the impact of sharp price swings. This allows them to remain indifferent to market direction and focus solely on earning spreads.

Market Maker and Taker: Two Sides of the Same Coin

The cryptocurrency market exists thanks to the interaction of two participant types.

Market maker — is a liquidity provider. They place limit orders that wait to be filled in the order book. Market makers earn income from spreads and are not in a hurry to execute.

Market taker — is an active trader who immediately executes available orders at the current market price. Takers pay a small fee for the convenience of instant execution.

A healthy market is created by the balance between these two participant types: makers provide liquidity, and takers generate trading activity. The result is narrow spreads, quick trades, and low transaction costs for all participants.

Why Market Makers Are Critical for Cryptocurrency Exchanges

1. Guaranteed liquidity and market depth

Market makers constantly fill the order book with enough buy and sell orders. This allows large trades to be executed without sharp price jumps. For example: attempting to buy 100 BTC without market makers would cause a huge price spike due to insufficient supply. With market makers, such a trade proceeds smoothly.

2. Price stabilization and reduced volatility

Crypto markets experience sharp fluctuations, but market makers work against extreme price movements. During panic sales, they activate buy orders to prevent crashes. During hype-driven buying, they place sell orders to reduce excessive spikes.

3. Efficient price discovery

Market makers help ensure that asset prices reflect real supply and demand rather than speculation in illiquid conditions. This leads to more honest prices and better market valuation.

4. Attracting traders and increasing exchange revenue

Liquid markets attract both retail and institutional traders. Higher trading volume means more commission income for the exchange. Many exchanges specifically collaborate with market makers to support new token listings, providing immediate liquidity.

Leading Market Makers in 2025

Wintermute

Wintermute is one of the largest algorithmic trading firms in the crypto industry. As of February 2025, the company manages approximately $237 millions in over 300 on-chain assets across 30+ blockchains.

The firm provides liquidity on more than 50 crypto exchanges, with a total trading volume of nearly $6 trillions (as of November 2024). Wintermute is known for advanced algorithmic strategies and reliability.

Strengths: Wide coverage of CEX and DEX, cutting-edge algorithms, strong reputation.
Limitations: Focuses mainly on large projects, may be less attentive to niche tokens.

GSR

GSR is a veteran crypto trading firm with over a decade of experience. The company offers market making, OTC trading, and derivatives trading, serving token issuers, institutional investors, and miners.

As of February 2025, GSR has invested in over 100 leading crypto projects and protocols. The firm operates on more than 60 crypto exchanges.

Strengths: Deep liquidity support, long-standing presence, focus on token launches.
Limitations: Mainly targets large projects, high service costs for small businesses.

Amber Group

Amber Group manages trading capital of about $1.5 billion for over 2000 institutional clients. As of February 2025, the total trading volume on the exchanges they serve exceeds $1 trillion.

The company is known for compliance-oriented services and AI-driven risk management.

Strengths: AI-based solutions, comprehensive financial services, strong focus on risk management.
Limitations: High entry requirements, not suitable for early-stage projects.

Keyrock

Keyrock is an algorithmic trading firm founded in 2017. As of February 2025, it manages over 550,000 daily trades across more than 1,300 markets and 85 exchanges.

Keyrock offers market making, OTC trading, options desk, treasury solutions, and liquidity pool management.

Strengths: Algorithmic optimization, customized solutions, data-driven approach.
Limitations: Fewer resources than giants, higher fees for bespoke services.

DWF Labs

DWF Labs is an investment and market-making firm specializing in Web3. As of February 2025, the company supports a portfolio of over 700 projects, including more than 20% of the Top-100 and over 35% of the Top-1000 projects on CoinMarketCap.

DWF Labs provides liquidity on 60+ leading crypto exchanges, trading both spot and derivatives markets.

Strengths: Market liquidity, competitive OTC solutions, early-stage investments.
Limitations: Works only with Tier 1 projects, strict selection criteria.

Risks Faced by Market Makers

Market volatility

The crypto market is known for its sharp price movements. If the market moves against a market maker too quickly, they may not have time to adjust their orders, leading to losses.

Inventory management risks

Market makers hold large volumes of crypto assets. If the value of these assets drops sharply, they will incur significant losses. This is especially risky in low-liquidity markets.

Technological risks

Market makers rely on advanced algorithms and HFT systems. Technical failures, cyberattacks, or latency issues can cause orders to be executed at undesirable prices, resulting in financial losses.

Regulatory risks

Cryptocurrency regulation varies by country, and sudden legislative changes can disrupt market maker activities. In some jurisdictions, market making may be classified as market manipulation. Compliance costs are high for companies operating globally.

Conclusion

Market makers are an integral part of the crypto ecosystem. They provide liquidity that makes trading possible and efficient. Their constant presence ensures traders can execute orders quickly, and prices remain fair and stable.

However, market makers face serious challenges: market volatility, technological risks, and a constantly evolving regulatory landscape. As crypto trading develops, the role of market makers will remain critical in creating a mature, accessible, and fair digital asset market.