What is a Market Maker? Definition, role, how they work?

Market Maker is a crucial concept in the financial world, particularly in the realm of cryptocurrencies. In financial markets, having a market maker ensures the continuity and stability of trading

So, what exactly is a Market Maker? What roles do they play? Let’s follow this article from AZcoin to better understand more about market makers and how they operate.

What is a Market Maker?

Market Maker (MM), also known as a market maker, is an individual or company that is a member of a cryptocurrency exchange. 

Their primary role is to provide liquidity to the market by continuously placing buy and sell orders for a particular asset, often in large quantities. This helps ensure the continuity and stability of trading, even when there are few buyers or sellers for a particular asset.

How Market Maker works

The operation of a Market Maker involves continuously placing buy and sell orders on the trading platform. Specifically, the main steps of a Market Maker’s operation include:

  • Determining the spread: Market Makers determine the difference between the buying and selling prices of an asset, known as the spread. This represents the profit they can earn from trades.
  • Continuous order placement: Market Makers continuously place buy and sell orders on the trading platform in large quantities. They are often willing to buy at lower prices and sell at higher prices compared to the current market price.
  • Providing liquidity: By ensuring readiness to buy and sell, Market Makers help provide liquidity to the market. This enables users to easily execute buy and sell transactions at or near instantaneously.
  • Risk management: Market Makers typically employ algorithms and strategies to manage risks from price fluctuations. They may use risk assessment tools to minimize losses during periods of market volatility.
  • Market monitoring: Market Makers monitor market developments and adjust their buy and sell orders to respond to changes in supply, demand and prices.

Market Maker way to profit

Below are the main ways Market Makers can profit:

  • Spread: Market Makers identify and exploit the difference between the buying and selling prices of assets. They typically buy at lower prices and sell at higher prices than the current market price, thus earning a profit from each trade.
  • Liquidity: By providing liquidity to the market, Market Makers can earn liquidity fees from buy and sell transactions. Users pay fees for the convenience of executing trades quickly and efficiently.
  • Risk management: Market Makers use strategies and risk management tools to minimize losses in volatile market conditions. Effective risk management helps them maintain long-term operations and stability.
  • Trading strategies: Market Makers can utilize algorithms and trading strategies to optimize profits from buy and sell orders. This may involve automating trading processes to capitalize on short-term trading opportunities.

Why is Market Maker important?

Market Makers play a crucial role in maintaining the continuity and stability of financial markets. By providing liquidity and stabilizing prices, they help users trade more conveniently and safely. Without Market Makers, buying and selling assets would be more difficult and prices could fluctuate significantly, increasing risk for investors.

You can refer to the best crypto exchange for more detailed information about hashrate and concepts related to cryptocurrency.

Differences between Market Maker and Automated Market Maker

In addition to MM, another concept in the cryptocurrency world that has recently developed is Automated Market Maker (AMM), also known as Automated Market Maker. Both concepts share the role of providing liquidity to the market, but there are some significant differences.

While MM operates on traditional exchanges, AMM operates on DeFi platforms. This means that AMM does not require a third party to confirm transactions, allowing users to trade directly with each other.

Furthermore, AMM does not rely on a specific individual or company to act as a market maker; instead, it operates through an automated smart contract system. Liquidity values in AMM are maintained by placing asset pools and the system automatically adjusts prices to balance these pools.

For more information on these concepts and their impact on the cryptocurrency market, explore topics like play-to-earn, BRC20 tokens and altcoins.

Top 5 largest Market Makers in the cryptocurrency market today

According to assessments from reputable sources in the cryptocurrency financial sector, the top 5 largest Market Makers currently include:

  • Alameda Research: This is a Hong Kong-based venture capital firm specializing in cryptocurrencies, established in 2017. Alameda Research is known for active market making operations on multiple major cryptocurrency exchanges, as well as investments in promising blockchain projects.
  • Alpha Theta: One of the companies providing liquidity and market making services to financial institutions and individual investors. Alpha Theta operates across multiple asset markets, including cryptocurrencies, forex and stocks.
  • GSR Market: Provides liquidity and market making services to investment funds, exchanges and individual investors. GSR Market operates across multiple asset markets, including cryptocurrencies, forex and precious metals.
  • Kairon Labs: Kairon Labs offers market making and portfolio management services to institutional and individual investors. Kairon Labs uses advanced trading algorithms to optimize profits and minimize risks for clients.
  • Bluesky Capital: A US-based venture capital firm specializing in cryptocurrencies, established in 2018. Bluesky Capital focuses on investing in blockchain infrastructure projects and DApps.


Above is an overview of the hashrate concept and how it works in the blockchain network. Hopefully this has helped you better understand the important role of hashrate in the blockchain network and the transaction confirmation process. If you need further help, you can contact AZcoin below.

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