The Role of Market Makers in Crypto Trading (03)
In this third part of this topic, I am going to share four interesting points that market makers play a role in the crypto trading stabilize and influence the market. Without the help of the market make,r it is difficult to sustain a coin. They are helping to provide not only liquidity but also the stability of the coin in the crypto market. Let's check these 4 points in this part of this topic.
Liquidity:
Without market makers, many crypto markets would suffer from illiquidity. For new and less popular coins would have been in very much trouble. Liquidity refers to the ease with which an asset can be bought or sold without affecting its price. Market makers ensure that there is always liquidity in the market by consistently placing buy and sell orders at different price levels.
Minimizing Spreads:
In a highly illiquid market, the spread between the bid and ask prices can widen significantly. So the participation cost is very expensive. But by placing orders on both sides of the order book, market makers help narrow the spread. The speculators and market makers help nicely to reduce the spread.
Stabilizing Prices:
Cryptos are notorious for their volatility. Market makers. Only the buying and selling pressure and their continuation can stabilize the price and help the market to be in a standard stabilized form. This is particularly important in the crypto market because news, sentiment or sometimes large individual trades can cause significant price movement. As there is a huge possibility of a high swing in price. So this is nicely important in stabilizing prices for the crypto market.
Facilitating Efficient Trading:
Without market makers, traders would often have to wait longer to execute trades. For low liquidity and a small market, it should have been a big problem. Market makers ensure that trades can be executed almost instantly. Such an efficient and instant market is helpful for institutional investors to enter and trade in the market.
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VEIGO (Community Mod)
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