What is Market Maker (MM)? Understand the role of the market maker

If you’ve ever traded crypto, you’ve probably heard of the concept of MM or Market Maker somewhere. But not everyone fully understands what MM really is and why they have such a significant impact on the market. To gain a clearer perspective, let’s explore these market makers in detail.

Who are the MM in the crypto market?

Market Maker (MM) is a key player in the crypto trading ecosystem. This list includes a variety of entities: from large exchanges to powerful financial institutions, big investment funds, and whales holding massive amounts of crypto.

The role of MM is not random. They are positioned in the middle of the market, acting as connectors in daily trading activities. When you execute a trade, sometimes your order is matched thanks to the intervention of MM, not just because a buyer and seller randomly meet.

Why are MM important: Providing liquidity and trading opportunities

The biggest benefit MM brings to the market is liquidity. Without them, the crypto market would struggle significantly to maintain price stability.

MM continuously offers trading opportunities for regular users. They maintain stable liquidity levels for each coin by constantly buying and selling, creating a sustainable flow of transactions. At the same time, they profit from the spread between buy and sell prices, along with trading fees provided by exchanges.

When a new coin is listed on an exchange, MM acts as an intermediary to shape the initial price. They create price movements that directly influence the asset’s reference price.

The dark side of MM: Price manipulation and liquidity sweep strategies

But the truth is, MM also have negative aspects that cannot be ignored. Due to their enormous capital and market power, they can manipulate prices at will.

One of the most annoying actions is liquidity sweeping. This occurs when MM repeatedly takes out small investors’ stop-loss orders, causing sudden price swings to trigger stop-loss points. Pumping the price is another tactic, where MM intentionally pushes the price up to attract more buyers, then dumps the asset, causing the price to crash.

It’s worth noting that MM operate within a certain regulatory gap. Because they are not tightly controlled by governments or strong regulatory agencies, they can perform these activities with little consequence.

Balancing benefits and risks: How should we view MM?

In reality, MM bring both benefits and risks. They provide liquidity, create a fairer playing field, foster healthy competition among exchanges, and help stabilize prices. But at the same time, they also know exactly how to profit from investors.

It can be said that MM know how to make the market excited with positive signals and profit opportunities, but they also know how to create despair through sudden volatility. This is nothing unusual in the financial world.

Understanding what MM is and how they operate will help you stay psychologically prepared when trading. What are your thoughts on these market makers? Are they good or bad? Share your opinions so we can discuss this topic more deeply.