The Role of Market Makers in Crypto Trading (01)

The crypto sector is growing fast. In the fast-paced world of crypto trading, market makers play a pivotal role. Market makers help to ensure liquidity and stability within the market. In this context, the traditional financial market is completely different. There the role of market makers is well-established and widely understood. But the crypto market is not well established like the traditional sector as it is still new to many. It is in a growing stage.

The main role of a market maker is to bridge the gap between buyers and sellers. It is good for smooth price movements and reducing volatility. However, the role they play in crypto trading is not always fully appreciated or understood, particularly by retail investors. In this series of discussions, I should try to discuss the important role market makers have played in the crypto sector including their function, strategies, and potential risks & rewards associated with all their activities.

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A market maker is essentially a participant or entity in a financial market. Mainly they ensure liquidity by continuously placing buy (bid) and sell (ask) orders for a particular asset. They are doing so for their sale or buy and gaining from it but in that way, they are creating the market. In doing so, they ensure that there is always someone ready to trade. This is particularly important in crypto markets as we know that liquidity is highly variable in the crypto market depending on the asset and the exchange. In the next post I shall try to cover in detail on them in the context of crypto trading.

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VEIGO (Community Mod)

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