Why are market makers the behind-the-scenes heroes of crypto trading?

In the cryptocurrency trading ecosystem, market makers, although rarely noticed by ordinary investors, are the key force maintaining overall market liquidity and stability. Without their participation, traders would face severe issues such as excessively wide bid-ask spreads, significant slippage, and difficulty in closing positions smoothly.

Market makers continuously place buy and sell orders at various price levels, enabling any trader entering or exiting the market to quickly find counterparties. This persistent market presence ensures smooth trading operations and prevents drastic price fluctuations. They profit from the bid-ask spread—this seemingly small margin can accumulate substantial gains over thousands of trades.

From Zero to Understanding: How Market Makers Operate

The core function of market makers is to act as liquidity providers. Unlike ordinary retail traders who aim to “buy low and sell high,” market makers’ profit model is entirely different—they earn from the spread on each transaction.

A typical market-making trade

Imagine a market maker placing an order for Bitcoin (BTC). They set a buy order at $87,370 and a sell order at $87,380. The $10 difference is their profit margin.

When a trader buys Bitcoin at $87,380, the market maker sells the BTC they hold and immediately replenishes new buy and sell orders. This process occurs thousands of times per second on large trading platforms, with the spread continuously flowing into the market maker’s account.

Risk management behind the scenes

Market makers do not simply place orders and wait for trades. They need to:

• Hedge positions across multiple trading platforms to reduce directional price risk
• Use high-frequency trading (HFT) algorithms to quickly adjust quotes in response to market changes
• Employ trading bots that dynamically adjust spreads based on market depth and volatility

These mechanisms ensure that market makers can operate stably during intense market fluctuations and protect themselves from extreme price swings.

Market Makers vs. Market Participants: Two Roles in the Market

The crypto trading market is composed of two core participants who complement each other to sustain the ecosystem.

Market Makers (Liquidity Providers) are the providers of liquidity. They pre-place limit orders, waiting for other traders to execute. This passive approach means market makers are always “standing guard,” offering counterparties to eager buyers and sellers. As a result, counterparties are always available, and spreads are kept low.

Market Takers (Active Traders) are the opposite. These traders execute immediate trades at current market prices, buying or selling instantly. Although they pay slightly higher prices or accept slightly lower prices, they gain the advantage of immediacy.

The interaction between these two roles creates a virtuous cycle: market makers provide stable quotes, and active traders’ activity continually finds counterparties for their quotes. The outcome is a more efficient market with lower trading costs and smoother entry and exit.

The 2025 Landscape of Leading Market Makers

Wintermute: A Model of Scale and Influence

Wintermute is a leading player in the market maker space. As of February 2025, this algorithmic trading firm manages approximately $237 million in assets, covering over 300 on-chain projects and more than 30 blockchains. They provide liquidity across over 50 global exchanges, with a cumulative trading volume reaching $6 trillion in November 2024 alone.

Wintermute’s strength lies in its global presence and advanced algorithms, serving top-tier projects while maintaining market stability. However, this also means they have limited focus on niche tokens and are somewhat reserved in supporting very early-stage projects.

GSR: Combining Old-Brand Reliability with Diversification

With over a decade in the crypto industry, GSR has become an established veteran. The company not only provides market making but also engages in OTC and derivatives trading, serving token issuers, institutional investors, miners, and exchanges.

By February 2025, GSR has invested in over 100 crypto protocols and Web3 projects. They offer liquidity on more than 60 exchanges worldwide, making them a preferred partner for projects aiming to maintain healthy token trading ecosystems. However, their services are more geared toward large projects and institutional clients, and fees for small startups may be relatively high.

Amber Group: AI-Enabled New Force

Amber Group manages about $1.5 billion in trading capital, with over 2,000 institutional clients and a monthly trading volume exceeding $1 trillion. Their standout feature is embracing AI technology and risk management principles.

They offer compliant-driven, AI-assisted services across global crypto exchanges. However, the entry barrier is high, and their core focus extends beyond market making, which may make them less suitable for small or early-stage projects.

Keyrock: Tech-Driven Elite

Founded in 2017, Keyrock has built strong algorithmic trading and liquidity optimization capabilities. As of February 2025, they handle over 550,000 trades daily across more than 1,300 trading pairs and 85 exchanges.

Their service offerings are comprehensive—including market making, OTC, options, treasury management, liquidity pool operations, and even ecosystem development consulting. Their data-driven approach ensures optimal liquidity distribution. However, compared to industry giants, Keyrock’s resources are limited, and their visibility is lower; some customized services may come at a higher cost.

DWF Labs: Dual Engine of Investment and Market Making

DWF Labs is a hybrid of investment and market making within the Web3 ecosystem. As of February 2025, they have invested in over 700 projects, including more than 20% of the CoinMarketCap Top 100 and over 35% of the Top 1000.

As a market maker, DWF Labs provides liquidity on more than 60 top-tier exchanges, supporting both spot and derivatives markets. Their advantage is offering both liquidity support and early-stage funding. The downside is they only work with Tier 1 projects and exchanges, with relatively strict evaluation standards.

Why Are Market Makers Important: An Exchange Perspective

Surge in Liquidity

Market makers continuously place orders, injecting a steady stream of trading volume and order depth into exchanges. This allows large trades to execute smoothly without causing price crashes due to lack of counterparties.

For example, without market makers, buying 10 BTC might require accepting an extremely high price due to insufficient sell orders. With market makers, ample liquidity absorbs such large orders with minimal price impact.

Managing Volatility

Crypto markets are inherently volatile, but market makers mitigate excessive price swings by dynamically adjusting spreads. During downturns, they provide support at buy orders; during excessive rallies, they increase sell-side supply. This buffering is especially critical for small-cap tokens—those with limited trading volume—where absence of market makers can lead to extreme price swings.

Improving Price Discovery

Continuous quoting by market makers helps the market discover true prices, bringing immediate benefits:

• Narrower spreads, reducing trading costs
• Faster trade execution, no waiting for counterparties
• Prices reflecting real supply and demand rather than false signals caused by liquidity shortages

User Growth and Revenue Increase

Markets with ample liquidity attract more retail and institutional traders. Rising trading volume directly boosts exchange fee revenue. Many exchanges actively collaborate with market makers to support new tokens, providing sufficient initial liquidity at launch to attract traders.

Real Risks Faced by Market Makers

Despite their vital contribution, market makers’ operations are not without risks.

Market Volatility Threats

Crypto prices change rapidly. If the market moves sharply against their positions, market makers may not have time to adjust quotes, resulting in trades at unfavorable prices and potential losses. Large positions are especially vulnerable during extreme market conditions.

Inventory Risk

Market makers must hold significant amounts of crypto assets to provide liquidity. If these assets’ value plunges, their holdings can shrink substantially. This risk is heightened in low-liquidity markets, where price swings are more violent and quick exit is difficult.

Technical and System Risks

Market makers rely on cutting-edge algorithms and high-frequency trading systems. System failures, bugs, or cyberattacks can disrupt trading and cause financial losses. Latency issues are particularly dangerous—just milliseconds of lag can lead to trades at poor prices.

Regulatory Uncertainty

Regulatory attitudes toward crypto market making vary worldwide. Some jurisdictions even classify market making as market manipulation, imposing legal penalties. The compliance costs are high globally, especially burdensome for small market makers.

Summary: The Indispensability of Market Makers

Market makers are the cornerstone of the crypto trading ecosystem. Their provision of liquidity, stability, and market efficiency is essential for the market’s smooth operation. Without them, traders would be plagued by huge spreads, runaway slippage, and difficulty in closing positions.

As the crypto market matures, the role of market makers will become even more critical. Although they face market risks, technological challenges, and evolving regulations, these difficulties do not change a fundamental fact: the market needs them. In the future, as trading ecosystems evolve, market makers will continue to shape a more liquid, efficient, and trustworthy digital asset market.