Market Maker (MM) is what? The role of liquidity providers

When participating in financial or cryptocurrency markets, you’ve surely heard of the concept of Market Maker or MM. These entities play an important role in maintaining market activity. What is an MM? Essentially, an MM is a market maker—an organization or individual providing liquidity to the market.

Who are the Market Makers?

In simple terms, MM includes various entities. Exchanges, large financial institutions, professional investment funds, and even traders with significant capital (often called “whales”) can act as Market Makers. They are present throughout the financial system and play an indispensable role.

Main Function of MM: Providing Liquidity

The primary benefit MM offers is continuous liquidity to the market. When you want to execute a trade, your order can be successfully matched thanks to the presence of Market Makers. Without them, the market would become unstable and much harder to operate.

Additionally, MM also profits from the spread between buy and sell prices, as well as from commissions charged by exchanges. They maintain liquidity for each coin, especially newly listed tokens. In these cases, MM acts as a third party, influencing prices to ensure the market remains stable.

Negative Impacts of Market Makers

However, MM can also cause undesirable issues. With large capital and influence over the market, they have the potential to manipulate prices at will. A common tactic is liquidity sweeping—removing stop-loss orders of small traders. This creates sudden price fluctuations that ordinary traders find difficult to predict.

Since they are not tightly regulated by authorities, MM are sometimes viewed as engaging in unfair practices. They may “pump” certain coins or manipulate prices to serve their own interests.

Balancing Benefits and Risks

Objectively, MM bring both benefits and risks. On one hand, they create a dynamic, competitive environment and reduce instability by maintaining price levels. On the other hand, they understand how to profit from traders’ movements—sometimes exciting traders during good times, but also creating moments of despair.

To better understand the role of MM in the market, it’s important to recognize their dual nature. In your opinion, do MM have more positive or negative impacts? Share your thoughts so we can discuss this topic further.