Market Maker
Entity providing market liquidity by placing buy and sell orders.
A market maker is an entity that continuously places both buy and sell orders for a specific trading pair, earning from the difference between bid and ask (spread).
How a market maker earns:
•Buys at bid price: $60,000
•Sells at ask price: $60,010
•Spread of $10 is their earnings
•At large volume: millions daily
Types of market makers: 1. Institutional — Jump Trading, DWF Labs, Wintermute, Alameda (former) 2. Automated (AMM) — Uniswap LPs are collective market makers 3. HFT firms — high-frequency trading algorithms
Why they matter:
•Without market makers, liquidity would be low, spreads wide
•Exchanges pay them (rebate) to provide liquidity
•Projects hire market makers for listings
Controversy:
•Some market makers (DWF Labs) accused of price manipulation for projects they provide liquidity to
•"Wash trading" — fake volume simulating activity
Maker fee: Limit orders (maker orders) pay lower fee because they add liquidity.