Market maker
A market maker is a trader or firm that keeps both buy and sell orders in the market at all times, providing liquidity. It earns the spread between them and fee rebates.
How it works
A market maker keeps a bid slightly below the market and an ask slightly above it. When someone buys from it and someone else sells to it, it earns the difference, called the spread. Because of this, other traders can buy or sell quickly without heavy slippage.
The main risk for a market maker is building up a position just as the market moves hard in one direction. Professional market makers therefore use algorithms, hedge their positions, and in a panic often widen the spread or pull their orders. That is when liquidity suddenly vanishes.
In crypto, projects often hire market makers for their tokens, sometimes lending them tokens to work with. That is normal, but opaque deals can be used to manipulate price.
A market maker quotes ETH at $2,999 bid and $3,001 ask. Within a minute one trader sells it 1 ETH and another buys 1 ETH from it. It earns $2 minus fees. If price had dropped to $2,950 in that time, it would have lost $49 on the ETH it bought.
Beginners often believe the market maker is hunting their personal stop. In reality stops get hit by sharp moves when the order book is thin, and the market maker is just pulling orders to protect itself. Avoid placing stops right on obvious round numbers and expect spreads to widen around news.
Questions and answers
What is a market maker in simple terms?
It is someone always ready both to buy and to sell, a little below and a little above the market. It earns that gap and keeps the market liquid.
Do market makers manipulate prices?
A normal market maker just provides liquidity. In small tokens, though, shady arrangements are sometimes used to pump the price.
Can I be a market maker myself?
Technically yes: you place limit orders on both sides. Earning steadily from it, though, takes algorithms, low fees and careful position risk management.
Related terms
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Updated: 2026-10-19