The Role of Market Makers in Crypto Trading (06)

The importance of market makers is very significant in the crypto sector and especially in crypto exchanges. These issues have been discussed in the previous five posts in a row. Today's post will shed light on the huge role that market makers play in crypto exchanges.

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In the case of crypto exchanges, there must be market makers because a crypto exchange cannot be imagined without market makers. For crypto exchanges, having market makers is crucial. Without sufficient liquidity, an exchange will struggle to attract traders. We know it would be difficult for traders to execute large trades without experiencing significant price slippage. In this situation, we see many exchanges actively seek partnerships with market-making firms. Without a partnership with market makers, it would be unusual for any exchange to exchange and trade coin pairs because there would be no price control and the slippage would be very high. So all exchanges want to do this but in the case of crypto exchanges, the situation is a little different because everything is run on a decentralized system, and smart contracts are required.

Most of the time exchanges offer the market-making firms reducing trading fees or other incentives to keep the order books filled with buy and sell orders.Market makers are essential for new token listings also. When a new crypto is listed on an exchange, there’s often very little trading activity initially. Market makers help “seed” the market by providing liquidity and encouraging other traders to participate. This helps new projects gain traction and ensures that traders can buy and sell the token without having to wait for the market to mature. This is how both ways market makers play role for the growth of crypto exchange sector.

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VEIGO (Community Mod)

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