How does the market maker cycle affect liquidity in the cryptocurrency market?

1 answers

• PlasmoMar 22, 2025 · a year ago
  In the cryptocurrency market, the market maker cycle directly impacts liquidity. Market makers are essential participants in the market who provide liquidity by continuously quoting bid and ask prices for assets. Their role is to ensure that there is always a market for buying and selling assets, which helps maintain liquidity. The market maker cycle affects liquidity in several ways. Firstly, when market makers actively participate in the market, they increase liquidity by providing more trading opportunities and narrowing the bid-ask spread. This allows traders to buy and sell assets at competitive prices. Secondly, market makers help stabilize the market by absorbing excess buying or selling pressure. This prevents large price swings and promotes a more orderly market. Lastly, market makers play a crucial role in attracting other participants, such as institutional investors, who rely on deep and liquid markets. Overall, the market maker cycle is vital for maintaining liquidity and ensuring the smooth functioning of the cryptocurrency market.
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