Fast order execution has become commonplace in today's market realities. But remember, whenever an asset is bought or sold, there must be someone on the other side of the transaction. Often that person is a market maker.
➡️ A market maker is a market participant whose role is to buy and sell an asset in order to add liquidity.
• A market maker places orders to buy/sell an asset which are executed either by market participants or by himself (to increase the trading volume).
➡️ What does the market maker earn from?
The MM receives the difference between supply and demand (spread) for providing the asset. For example, he might quote a selling price of $20 and a buying price of $20.05. This means that the profit per token will be $0.05.
➡️ What does the market maker risk?
In a word - sharp moves. When the market crashes, the MM is forced to buy assets that are falling in price. It also leads to a slowdown in buying as most seek to shed their positions. Buying will of course resume, but at a value lower than the average buying price of the fall.
➡️ Can a market maker "draw" a chart?
Hypothetically, the MM could place a large order of 3x the current price and buy it back himself. This would draw a high shadow of a candle on the chart, but in the end the price would instantly return to its original value.
• In addition, market makers are subject to rules that prohibit manipulating the price of assets.
❔ Did you know what a market maker is?
Yes - 👍
No - 👎
📈Crypto_Shekar