👉 Market maker is a concept that plays an important role in financial markets, especially in cryptocurrency markets. Market makers provide liquidity in the market by acting as intermediaries between buying and selling. In this way, investors can buy or sell at any time.
👉 Simply put, market makers are constantly offering bids and asks for a particular asset. For example, a market maker might offer to buy Bitcoin at $29,500 and sell it at $30,000 on an exchange. The difference (spread) is the market maker’s profit. This profit is a type of commission the market maker receives for providing liquidity.
What Do I Mean By Liquidity 👀
Market makers provide liquidity so that buying and selling transactions can be easily made. Liquidity refers to the ability of an asset (for example, a cryptocurrency) to be easily bought and sold.
🟢Example 1
Let's say you want to buy Bitcoin on an exchange. If there is enough liquidity in the market, meaning there are many buyers and sellers, you can buy Bitcoin quickly and at a reasonable price. This is a situation where liquidity is high.
🔴Example 2
For another example, imagine you have 100 Bitcoins and you want to sell them. If the market is low liquidity, meaning there are few buyers, it will be difficult to sell your Bitcoins and you may have to sell them at a lower price. In this case, liquidity is low.
ℹ️ Market makers constantly provide buy and sell offers, ensuring that there are always buyers and sellers in the market. This increases liquidity and makes it possible to easily make buy and sell transactions.
Via: CryptoPNZ
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