Market Makers And Their Role In Stabilizing The Volatile Crypto Market

Most people refrain from investing in crypto solely because of how volatile this market can get. But there are a group of people whose existence solves quite a bit of this problem.
They are the Market Makers who “make a market” more stable and prevent it from going haywire. But how and why do they do it?
To get the answer, keep on reading.

What Is A Market Maker, And How Do They Stabilize The Volatile Crypto Market?

Market makers are agencies or individuals who help provide liquidity and depth in the market.
They ensure that investors can invest in any currency at their convenience without burning much cash in trading costs. But at the same time, earn from the difference in the bid-ask spread (the gap between the highest bid and the lowest ask price).
They do it by actively quoting in two-sided markets (i.e., crypto market or stalk market) and owning large-size inventories that stock digital currencies.

1. What is Liquidity?

Liquidity is a term used to describe the ease with which an asset can be converted into cash without disturbing the market price.
Cash is the most liquid asset, as it can be converted into any other asset the quickest. In comparison, assets like real estate, art, and collectibles rank very low on the liquidity spectrum.

Why Are Market Makers So Important?

Market Makers bring liquidity to the crypto market, and here are the top three reasons why liquidity is so important for maintaining stabilization in the crypto market.

1. Liquidity Lowers The Chances Of Price Manipulations

Liquidity in the crypto market lowers the scope for dishonest actors to manipulate the prices.
Since crypto is still in its primitive stage, it majorly lacks regulations, which turns out as an opportunity for a group of unscrupulous people. The more deep and liquid digital assets (i.e., Bitcoin or Ether) become, the more difficult it will get to establish a monopoly and control the prices.

2. Less Price Manipulation Means a More Stable Market

If the market is less corrupt, then there will be considerably more active buyers and sellers.
Which means whenever someone sells an asset, there will be enough participants to buy it. Besides, in a highly liquid market, traders can initiate and exit positions with very little slippage or price fluctuation. Therefore getting more stability.

3. Helps Analyze the Behavioral Patterns Of The Traders

Liquidity in cryptocurrency is also denoted by the number of people interested in buying or selling their assets. More liquidity means more participants.
If the market receives large numbers of both sell and buy orders, not only the volatility reduces, but it also helps get a comprehensive picture of the market. The data can help traders to make more well-informed decisions and gain better profits.

What Does It Take To Become A Market Maker In Crypto?

You can become a Market Maker in crypto in two ways. One is by becoming a part of the above-mentioned market-making giants, and the other is (you’ve already guessed) by going solo and competing with them.
The first option is rather easy for beginners and gives a lot of room for learning. Whereas, if you are planning to become an individual market maker, you get less guidance and need to figure things out on your own.
However, one thing that is a must in either of the cases is a great portfolio of work done by you in this field.


In simple words, Market Makers make the crypto market more volatile, which as a ripple effect, makes the marketplace more stable. Sign up to TheMaker today.
They are like a safety net for ordinary traders and one of the biggest reasons for the crypto market to thrive.
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