How Market Makers Drive Liquidity in the Crypto Market: In-Depth Analysis and the 2025 Ecosystem Landscape

Behind the smooth operation of the crypto trading market, there is a group of unsung market participants working silently—they are market makers. These institutions and professional traders place orders on both sides of the buy and sell, injecting continuous liquidity into the ecosystem, which is crucial for the efficient functioning of the crypto market. Without these liquidity providers, traders would face huge bid-ask spreads, frequent slippage, and even the inability to execute large orders.

What Are Crypto Market Makers? Core Functions Explained

In the crypto ecosystem, market makers are entities, investment funds, or professional trading firms that utilize algorithmic trading and high-frequency trading (HFT) technologies to continuously place orders on both sides of trading pairs. Unlike retail traders aiming for “buy low, sell high” to realize profits, market makers earn their income from the bid-ask spread—this seemingly small difference accumulates into substantial revenue over millions of trades.

Their presence ensures market continuity. When you want to buy or sell an asset quickly, you don’t have to wait long for a counterparty because market makers are always there, ready to trade with you. This is why both centralized exchanges (CEX) and decentralized exchanges (DEX) heavily rely on such participants—without sufficient liquidity supply, the trading experience would quickly deteriorate.

According to the latest data, Bitcoin (BTC) is currently priced at $88.87K, and the normal operation of the market is built on a multi-layered ecosystem that includes market makers among other participants.

How Market Makers Operate: From Placing Orders to Profits

Core Trading Process

Taking BTC as an example, a market maker might simultaneously place a buy order (bid) and a sell order (ask):

• Buy order price: $88,800
• Sell order price: $88,920
• Spread profit: $120

This spread may seem small, but when repeated thousands or tens of thousands of times daily, the accumulated profit becomes significant. Market makers dynamically adjust these prices based on real-time market fluctuations, order book depth, and trading flow to manage market risk.

Algorithms and Automation

Modern market makers almost entirely rely on automated trading systems and high-frequency trading (HFT) algorithms. These systems can execute thousands of trades within milliseconds, respond swiftly to market changes, adjust positions, and minimize risk exposure. When increased market volatility is detected, the system automatically narrows the spread; if hedging is needed, market makers adjust orders across multiple exchanges simultaneously.

Inventory Management and Risk Control

Market makers are not passive order takers but actively manage their holdings. They arbitrage across different exchanges to lock in profits from price differences. At the same time, they must guard against inventory risk—holding too much of a certain coin can lead to severe losses if prices plummet.

Market Makers vs. Order Takers: The Market Dichotomy

The crypto trading ecosystem consists of two key roles: market makers (liquidity providers) and order takers (liquidity consumers).

Market Makers: Add liquidity by placing limit orders that do not execute immediately but wait in the order book for counterparties. Their profit comes from the bid-ask spread.

Order Takers: Trade at the current market price for immediate execution, gaining liquidity instantly but often at worse prices. An immediate buyer is accepting a sell order, hence called an “order taker.”

These two roles form a perfect complementary system: market makers provide stable counterparties, while order takers generate market activity and demand. This balance effectively reduces slippage, increases order book depth, and lowers trading costs for all participants.

Top Market Maker Ecosystem in 2025

Wintermute: Leader in Algorithmic Trading

As of February 2025, Wintermute manages approximately $237 million in assets across over 30 blockchains and more than 300 on-chain assets. The company provides liquidity on over 50 exchanges, with a cumulative trading volume approaching $6 trillion in November 2024.

Strengths: Comprehensive coverage, advanced technology, stable industry reputation
Limitations: Less focus on small-cap tokens, higher entry barriers

GSR: Veteran Diversified Service Provider

With over ten years of experience in crypto trading, GSR has invested in more than 100 top projects and protocols, building deep ecosystem connections. The firm operates on over 60 exchanges, covering spot, derivatives, and OTC trading.

Strengths: Rich experience, comprehensive services, strong ecosystem ties
Limitations: Focuses more on institutional clients and large projects; costs for small projects may be higher

Amber Group: AI-Driven Risk Control Experts

Managing around $1.5 billion in trading capital, serving over 2,000 institutional clients, with a total trading volume exceeding $1 trillion. The company emphasizes AI-powered risk management and compliance solutions.

Strengths: Strong risk control, institutional-level services, significant AI empowerment
Limitations: High entry barriers, relatively high service costs

Keyrock: Algorithmic Elite

Executing over 550,000 trades daily across 85 exchanges and more than 1,300 trading pairs. Since its founding in 2017, Keyrock has established a full-stack service system including market making, OTC, options trading, and treasury management.

Strengths: Large trading volume, data-driven, flexible solutions
Limitations: Lower visibility, higher costs for personalized services

DWF Labs: Versatile Investment Market Maker

Managing over 700 project portfolios, supporting more than 20% of projects in CoinMarketCap Top 100 and over 35% in Top 1000. Providing spot and derivatives liquidity on over 60 top exchanges.

Strengths: Combines investment and market making, broad coverage, strong project evaluation
Limitations: Only collaborates with Tier 1 projects and exchanges; strict evaluation processes

These top market makers employ cutting-edge algorithms, data analysis, and trading strategies to continuously optimize market liquidity and trading efficiency.

The Real Value Market Makers Bring to Exchanges

Explosive Growth in Liquidity

Continuous buy and sell orders ensure sufficient market depth. For example, with major coins like BTC, the participation of market makers prevents price jumps when users buy 10 BTC. Without this safeguard, markets could spiral into vicious cycles.

Enhanced Price Stability

In the face of extreme volatility, market makers act as “stabilizers.” They maintain buy orders during declines and provide sell pressure during rises, effectively suppressing extreme market conditions. This role is especially critical for less liquid small and mid-cap coins.

Market Discovery and Pricing Efficiency

Through continuous quoting, market makers help the market form a consensus on the true value of assets. Tight spreads reflect market efficiency, and low trading costs encourage more retail and institutional participation, further enhancing liquidity.

Exchange Revenue and Growth

Higher liquidity translates into larger trading volumes, directly increasing exchange fee revenue. Many exchanges establish long-term partnerships with market makers to provide initial liquidity for new tokens, helping projects launch quickly.

Risks and Challenges Faced by Market Makers

Market Volatility and Losses

Crypto markets are highly volatile, which is a double-edged sword. Rapid price reversals can leave market makers with insufficient time to adjust orders, forcing trades at unfavorable prices and accumulating losses.

Position Management Risks

Market makers need to hold large amounts of various tokens to maintain liquidity. If a token’s price crashes, holdings can incur huge unrealized losses. This risk is especially dangerous in less liquid small-cap markets.

Technical Failures

Reliance on complex algorithmic systems exposes market makers to risks like system crashes, network delays, and execution errors. A major failure could cause losses in the millions within seconds.

Regulatory Uncertainty

Regulations and definitions for market makers vary worldwide. Some jurisdictions may conflate market making with market manipulation, posing legal risks. The costs of compliance for cross-border operations are also increasing.

Future Outlook: Evolution of the Market Maker Ecosystem

The crypto trading market is maturing. With institutional capital influx and regulatory frameworks improving, the role of market makers will become more professional and indispensable. While new automated market makers (AMMs) excel in DEXs, they still cannot fully replace traditional market makers in depth, cost, and user experience.

In the future, competition among market makers will focus on two directions: first, technological prowess—whose algorithms are faster and more precise will have an advantage in high-frequency trading; second, ecosystem collaboration—those who establish closer relationships with more exchanges and projects will gain more business opportunities.

For retail and small projects, understanding how market makers operate helps better grasp market structure. For exchanges, choosing the right market maker partner is a key decision to ensure a healthy market.