Top Reasons why Market Makers Play a Critical Role in Cryptocurrency Trading
Let's all accept it: Crypto is relatively illiquid. You can't compare how the space fares versus, say, the yellow metal market.
Gold—its CFD is available for trading at CryptoAltum—has a market cap of $9 trillion. It may take crypto several years to compete with gold's level of liquidity.
As such, market makers are the lifeline of cryptocurrency exchanges and individual tokens. Without the right market-making partner, the crypto token/coin is illiquid and dead on arrival. Without buyers and trading volumes, it becomes hard for those projects to be listed at cryptocurrency exchanges.
Thus, a cryptocurrency exchange or a token project must partner with a reliable market maker. These players would increase the order book depth and general market liquidity, preventing prices from being manipulated.
With decent order book depth, volatility is reduced to manageable levels as traders are quickly filled at fair rates since market makers would also help in fair price discovery.
A competent market maker(s) also brings order, especially in entry and exit points for traders. At the same time, traders enjoy consistent and fair spread levels since these players ensure bid-ask spreads are more efficient in the exchange's order book.