Market Maker (order book)
An entity providing liquidity by placing buy and sell limit orders in the order book.
What is Market Maker (order book)?
Market makers are firms or individuals maintaining order books by quoting bids and asks, profiting from spreads and rebates. On centralized exchanges like Binance, they ensure liquidity for pairs like BTC/USD, narrowing spreads to 0.01%. Firms like Wintermute handle billions in volume, using algorithms for constant presence.
They remain neutral, hedging inventory to avoid directional risk. In crypto, market makers like GSR customize strategies for tokens, reducing volatility. Exchanges pay rebates, like 0.2% of trade value, for added liquidity.
Related Terms
CLOB (Central Limit Order Book)
A trading mechanism that matches buy and sell orders for assets based on price-time priority, commonly used in both traditional and decentralized exchanges.
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USDT/Tether, a digital asset pegged 1:1 to the USD, issued by Tether Limited, widely used for trading and liquidity.
Altcoin
Any digital asset or cryptocurrency other than Bitcoin, often developed to offer alternative features, use cases, or improvements.
Staking of Ethereum PoS
The process of locking up Ether (ETH) to participate in Ethereum’s Proof-of-Stake consensus and earn rewards.
Embedded Call Option
A call option integrated into a security, like converts, allowing conversion to equity.
FATF Travel Rule
Financial Action Task Force standard mandating virtual asset service providers to share originator and beneficiary information for digital asset transfers, including stablecoins, to prevent illicit finance.