Crypto market makers are professional participants in cryptocurrency markets who continuously place buy (bid) and sell (ask) orders in trading pairs. Their main task is to ensure market liquidity, namely:
- the ability to quickly buy or sell an asset;
- a minimal spread between the buy and sell prices;
- stable market operation without sharp price gaps.
Unlike regular traders, market makers do not wait for price movements but earn from:
- a large number of trades;
- minimal price fluctuations;
- reduced or negative trading fees.
On centralized exchanges (CEXs), market makers operate using a traditional order book, placing buy and sell orders.
In contrast, decentralized exchanges (DEXs) usually rely on automated market making (AMM). In this case, liquidity is provided by smart contracts that automatically determine asset prices without using a classic order book.
Who can be a market maker in cryptocurrency?
Market makers can be both professional traders and automated systems.
Trader market makers manually analyze the market, assess supply and demand, take into account news and market events, and then make trading decisions. They constantly adjust their strategies in response to market changes.
Automated systems perform the same functions but without human involvement, based on predefined algorithms. A market-making bot independently manages orders and maintains liquidity, calculating buy and sell prices while considering:
- supply and demand;
- market trends;
- order book depth.
Such a bot usually operates as a standalone system created and configured by an individual user or a company, using proprietary algorithms different from AMM protocols.
Crypto market making strategies
To effectively provide liquidity, market makers use various trading approaches. The choice of strategy depends on the market, the asset, the level of risk, and technical capabilities. Below are the most common strategies used in crypto market making.
Passive market making
With this strategy, the market maker places limit buy and sell orders in advance at selected price levels and waits for other market participants to execute them. The main source of income is the spread between the buy and sell prices. This approach helps reduce trading risks, as trades are executed at predefined prices.
Statistical market making
This method is based on the analysis of historical data, price behavior, and market patterns. Market makers use mathematical models and algorithms that automatically update quotes according to current market conditions. The goal is to maintain competitive prices and adapt to changes in supply and demand.
High-frequency market making (HFT)
High-frequency trading uses ultra-fast algorithms and specialized infrastructure that allow thousands of trades to be executed within a very short period of time. This strategy aims to continuously supply the market with liquidity and generate profits from minimal price movements. Even a small price difference can be profitable when executed across a large number of trades.
Cross-exchange arbitrage
This strategy is based on price differences of the same asset across different exchanges. A market maker buys cryptocurrency where it is cheaper and almost instantly sells it on another platform at a higher price. Successful arbitrage requires fast trade execution and effective risk management.
Key risks and challenges of market making
Despite its advantages, market making involves a number of risks that must be considered.
Market volatility
Sharp and unpredictable price movements can lead to financial losses, especially if positions cannot be adjusted in time.
Limited liquidity
On low-liquidity or newly launched trading pairs, market makers may face order execution issues due to low activity from other market participants.
Regulatory constraints
Changes in legislation or regulatory policies may affect the ability to work with certain assets or operate in specific markets.
Technical risks
Failures in trading systems, internet connectivity issues, or algorithm errors can negatively impact trading performance.
Market manipulation
Bad actors may use manipulative practices such as spoofing or front-running. This distorts market signals and can create additional risks for market makers and traders.
Opportunities for crypto market makers on WhiteBIT
WhiteBIT offers market makers special trading conditions that are not available to standard accounts. By joining the Market Making Program, you will receive attractive discounts and rebates based on your trading volume. The program also provides multiple subaccounts, low-latency access through colocation services, and 24/7 dedicated professional support.
There is an option to fund accounts via SEPA payments on individual terms. To access this feature, you must complete the Know Your Business (KYB) procedure. The platform offers convenient and cost-effective deposit and withdrawal solutions specifically tailored for market makers and professional crypto market participants.
In addition, WhiteBIT provides access to passive income tools through crypto lending. Users can choose a suitable lending plan and earn up to 18.64% APR in USDT. The setup process is simple and takes only a few steps. You can borrow cryptocurrencies at low interest rates without selling your own assets by using the crypto borrow functionality. You will also receive API access for automated and algorithmic trading.
WhiteBIT ensures a high level of security for users. The platform is certified in accordance with international standards. It uses a Web Application Firewall (WAF) to block potential cyberattacks, stores 96% of digital assets in cold wallets, and conducts regular systematic audits. In addition, advanced encryption is used to protect your personal information.
To gain access to these opportunities, please fill out the form on the page
https://institutional.whitebit.com/market-makers#anchor-form and our representatives will contact you.
Support
In case of any questions related to the functionality of our exchange, you can:
- Leave a request on our website;
- Write to the support email: support@whitebit.com;
- Write to the chat using the button
in the lower right corner of the screen (in the upper right corner of the WhiteBIT app, click
).