Friends, fast order execution has become commonplace in the current market realities. But remember that whenever an asset is bought or sold, there has to be someone on the other side of the transaction. This is often the market maker.
📑 A market maker is a market participant whose role is to buy and sell an asset 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 trading volume).
💵 What does a market maker earn from?
A MM earns the difference between supply and demand (spread) for providing an asset.
For example, he may quote a sell price of $20 and a buy price of $20.05. This means that the profit per 1 token will be $0.05.
🔖 What does a market maker risk?
In a word, sharp movements. When the market is hit by selling, the MM is forced to buy assets that are falling in price.
It also causes purchases to slow down as most tend to reset their positions.
🖌 Can a market maker "draw" a chart?
Hypothetically, a MM could place a large order of 3x the current price and buy it back himself. This would draw a high candlestick shadow on the chart, but eventually the price would instantly return to its original value.
In addition, market makers are subject to rules against manipulating the price of assets.
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