How Market Makers Shape Cryptocurrency Markets: In-Depth Analysis and the Market Landscape in 2025

Why the Market Can’t Do Without Market Makers

The 24/7 operation of cryptocurrency trading markets presents unprecedented challenges to liquidity. Market Makers, as key liquidity providers, continuously place both buy and sell orders, solving the critical issues retail traders might face—wide spreads, extreme volatility, and difficulty executing large orders.

Without these professional market makers, trading would devolve into an inefficient waiting game: retail traders would need to wait for opposite orders to appear to complete their trades. The presence of market makers changes all that, making trading smooth, predictable, and profitable. These institutions are typically large financial firms, hedge funds, and professional algorithmic traders like Wintermute, GSR, DWF Labs, and others.

How Market Makers Actually Operate

Core Profit Model

Imagine a market maker operating in Bitcoin (BTC) trading:

• Step 1: Place a buy order at $100,000 and a sell order at $100,010, with a $10 spread as their profit margin
• Step 2: When a trader executes a sell order (selling BTC), the market maker buys; when a trader executes a buy order (buying BTC), the market maker sells
• Step 3: Through thousands of such trades, the seemingly small $10 spread accumulates into a steady stream of income

Operational Layers

Modern market makers employ multi-layered strategies to ensure market health:

Automated Pricing Systems: Using high-frequency trading (HFT) algorithms, they analyze market depth, volatility, and order flow in milliseconds, dynamically adjusting bid-ask spreads. This means spreads widen during sharp fluctuations and narrow in calm markets, automatically balancing risk.

Inventory Management: Market makers operate across multiple exchanges, hedging risks through cross-exchange arbitrage. They are not gamblers but risk management experts, ensuring their positions are not wiped out by single-market swings.

Liquidity Support for New Tokens: When new tokens launch, market makers provide initial liquidity, ensuring early traders can transact at reasonable prices—crucial for project launches.

Market Makers vs. Market Participants: Two Key Roles

Though their roles differ, both are essential to the market ecosystem:

Market Makers are “liquidity providers”—they actively create trading opportunities. Their limit orders do not execute immediately but wait for market participants to take the other side. This proactive approach yields stable, albeit small, but reliable income.

Market Takers are “speed traders”—they prefer to trade immediately at current market prices. Their urgency creates trading opportunities for market makers and accelerates price discovery.

In a healthy market, these two forces balance each other: market makers continuously supply liquidity, while takers generate trading opportunities. The result: narrower spreads, increased depth, faster execution—benefiting all participants.

Leading Market Maker Teams in 2025

Wintermute—The Algorithmic Trading Titan

This company is a benchmark in market making. By February 2025, Wintermute manages approximately $237 million in assets, covering over 300 on-chain assets across more than 30 blockchains. Their market coverage is impressive:

• Operating on over 50 crypto exchanges
• As of November 2024, cumulative trading volume approaching $6 trillion
• Operating in both centralized (CEX) and decentralized (DEX) markets

Strengths: Global exchange coverage, proven algorithms, industry reputation | Weaknesses: Less attention from small or early-stage projects

GSR—A Veteran with Deep Industry Roots

This firm has a solid foundation, operating in crypto for over a decade. GSR’s services extend beyond market making to OTC trading and derivatives.

By February 2025, GSR has invested in over 100 leading crypto companies and protocols, providing liquidity on more than 60 exchanges. Their broad portfolio indicates they are not just market makers but also industry strategists.

Strengths: Deep industry experience, diversified services, long-term project support | Weaknesses: Mainly serving large projects, higher fees for smaller ones

Amber Group—AI-Driven New Force

Managing around $1.5 billion in trading capital, serving over 2,000 institutional clients. Amber Group’s特色在于融合人工智能的风险管理和合规导向的服务体系。

他们的交易深度也相当可观——覆盖全球多家交易所，累计日交易额超过$1万亿（截至2025年2月）。

优势：AI赋能、高度合规性、风险管理出众 | 劣势：进入门槛高、服务复杂项目能力有限

Keyrock—Data-Driven Precise Matcher

Founded in 2017, Keyrock has become a technical benchmark in algorithmic trading. They process over 550,000 trades daily, covering 1,300+ markets and 85 exchanges.

Their unique service lineup includes not only market making but also OTC trading, options desks, treasury management, liquidity pool management, and ecosystem development support.

优势：数据驱动的精准优化、定制化方案、覆盖面广 | 劣势：资源有限，知名度较低，定制服务成本可能较高

DWF Labs—Dual Engine of Web3 Investment and Market Making

This firm plays a dual role: both as an investor and a market maker. They manage a portfolio of over 700 projects, including more than 20% of the CoinMarketCap Top 100 and over 35% of the Top 1000.

Liquidity coverage exceeds 60 major exchanges, with active presence in spot and derivatives markets.

优势：深度绑定项目、早期投资优势、广泛的交易所覆盖 | 劣势：仅合作Tier 1项目、评估标准严格

The Substantial Impact of Market Makers on Exchange Ecosystems

1. Sustainable Liquidity Supply

Continuous buy and sell orders from market makers build the backbone of the market. This means that even during quiet periods, users can trade at reasonable prices. For example, a retail trader wants to buy 10 BTC at once:

• With market makers: Market depth is sufficient, price fluctuations are minimal, and the trade proceeds smoothly
• Without market makers: Must accept existing sell orders one by one, potentially causing the last few BTC to spike in price

2. Natural Volatility Dampening

Crypto markets are known for their volatility, but Market Makers act as natural “dampers.” By constantly adjusting spreads and order sizes, they create sell pressure during bull markets to prevent excessive rises, and provide buy support during bear markets to prevent free falls. This self-regulating mechanism is especially critical for low-liquidity small-cap tokens.

3. Accelerated Price Discovery

Through continuous quoting, market makers help the market find the true value of assets more quickly. Their algorithms, combining data from multiple global markets, efficiently synchronize price signals across the entire market, reducing arbitrage opportunities and improving overall market efficiency.

4. Self-Reinforcing Trading Ecosystem

High liquidity attracts more traders and capital, further increasing trading volume, which in turn reinforces market makers’ profit expectations. When new tokens launch, exchanges often collaborate with professional market makers to create immediate tradable liquidity pools—an essential part of project success.

Real Risks Market Makers Face

The Other Side of Market Risks

While market makers profit from spreads, they are also exposed to market risks. When BTC drops from $100,000 to $95,000 within hours, market makers holding large inventories of BTC may suffer significant losses. This volatility is even more intense in low-liquidity markets.

System Vulnerabilities

Reliance on high-frequency algorithms means that system failures, network delays, or coding errors can lead to catastrophic consequences. Erroneous orders might execute at unintended prices, or market makers may be unable to close positions in time, leading to losses.

Inventory Buildup Risks

Holding large amounts of crypto assets is inherently risky. If a small token suddenly crashes, market makers may be forced to liquidate at a loss or become trapped in a liquidity drought.

Regulatory Uncertainty

Regulations regarding market making activities are still evolving across jurisdictions. Some may label certain market making behaviors as “market manipulation,” posing legal risks. For global market makers operating across multiple regions, compliance costs are an important consideration.

The Future of the Market Making Ecosystem

Market makers have evolved from behind-the-scenes players to core infrastructure of the crypto financial ecosystem. They not only sustain 24/7 markets but also drive industry development through investments and technological innovation.

However, challenges are intensifying: regulatory uncertainty, system complexity, and increasing market risks. As markets mature from frenzy to stability, expectations for market makers are rising—they must provide liquidity while maintaining sustainability amid complex risk environments.

Key Insight: The presence or absence of Market Makers directly determines a market’s usability. Exchanges and tokens with high-quality market makers tend to exhibit higher liquidity, lower trading costs, and more stable prices—key factors attracting long-term institutional capital. Understanding how Market Makers operate is fundamentally understanding the functioning of modern crypto markets.