In the world of cryptocurrency trading, market makers play a crucial role in maintaining market liquidity and efficiency. A market maker is an entity, either an individual or a firm, that stands ready to buy and sell a particular cryptocurrency at all times. By doing so, market makers ensure that there is always a buyer or seller available in the market, preventing large price fluctuations and providing traders with the opportunity to execute trades quickly and at fair prices.
One of the key responsibilities of a market maker is to constantly adjust their bid and ask prices based on market conditions. For example, if there is a sudden surge in demand for a particular cryptocurrency, a market maker may increase their asking price to reflect the higher demand. Conversely, if the market is experiencing a sell-off, the market maker may lower their bid price to entice sellers to trade.