What is market making in crypto? A simple explanation
When you buy a coin on an exchange, someone has to be selling it to you. In a small or new market, there may be nobody. Market makers solve this problem.
What a market maker does
A market maker places both buy orders (bids) and sell orders (asks) at the same time, close to the current price. This keeps trading smooth, so ordinary traders can buy or sell quickly.
The spread
The small difference between the buy price and the sell price is called the spread. A market maker aims to earn a small profit from this spread many times a day.
Why it matters
- Tight spreads mean you pay less to trade.
- Deep order books mean a big order does not move the price much.
- New tokens often hire market makers so that people can trade them from the first day.
Risks for market makers
If the price moves sharply in one direction, the market maker can be left holding coins that are falling in value. Managing this risk is the main skill.
What to look for as a trader
A coin with a very wide spread or thin order book is harder to trade and easier to push around. This is one reason to be careful with tiny tokens.
This article is for information and is not investment advice.