This website uses cookies to ensure you get the best experience on our website

Crypto Tip: A Liquidity Provider versus a Market Maker


Without getting twisted, Liquidity providers and market makers serve the same purpose but with some subtle differences.

They both provide liquidity which in turn determines the volumes of an exchange. Their roles are to ensure the pair has enough liquidity at any point in time, enabling seamless trading. 

Given their near overlapping roles, a market maker is easily identifiable because they are common in traditional cryptocurrency exchanges. They are high-volume traders that concurrently provide liquidity to multiple trading venues. Providers can include third-party entities—mostly hedge funds—and make their profits from bid-ask spreads.

A liquidity provider, on the other hand, is more specific to crypto. Because they get paid to supply liquidity, there are no third parties involved making trading trustless. Liquidity providers will make use of pools that provide markets for specific pairs. Interestingly, anyone can create pools, and everyone can supply liquidity—qualifying as liquidity providers—as long as they stake their assets in that pool.

For more interesting tips and facts visit our Education Centre.


Have Questions? 

We're available 24/7 to help you. You can email us, or send us a message on WhatsApp, Telegram or Messenger!

Risk Disclosure: Trading cryptocurrencies or any other financial instrument involves a significant level of risk and may result in a total loss of your investment. You should consider carefully whether investing in Bitcoin or any other instrument offered by CryptoAltum is appropriate to your financial situation. CryptoAltum only accepts deposits in Cryptocurrencies. By trading with CryptoAltum you acknowledge your understanding of this risk disclosure and your agreement with the Terms and Conditions.
  • Copyright Excel Innovations Ltd (CryptoAltum) 2020