Maker Definition
A Maker in the context of cryptocurrencies and blockchain is an entity that provides liquidity to the market by placing limit orders on the order book of an exchange. Makers are essential in creating a balanced and efficient market setting.
Maker Key Points
- A maker adds liquidity to the market by placing limit orders.
- Makers help to maintain a balanced and active market by providing more trading options.
- The term ‘maker’ is derived from the fact they ‘make’ the market.
- The opposite of a maker is a ‘taker’ who removes liquidity from the market.
Who are Makers?
In the world of cryptocurrency trading and blockchain, a maker can be any individual or institution that places a limit order onto the order book of an exchange. These orders are not filled immediately and therefore add to the overall liquidity of the market.
What do Makers do?
Makers place limit orders onto the order book by specifying a price at which they wish to buy or sell a certain amount of a particular cryptocurrency. This action essentially ‘makes’ the market as it sets a price point at which other traders can choose to engage.
When do Makers operate?
Makers are active any time a limit order is placed onto the order book. This can be at any time and in any market state, whether the market sentiment is bullish, bearish or neutral.
Where are Makers found?
Makers are found on any cryptocurrency trading platform or exchange that supports limit orders. They can be individuals day trading from their home, or large institutions placing high-volume orders.
Why are Makers important?
Makers provide much needed liquidity to the market. Having a lot of liquidity is beneficial because it helps ensure smooth operation of the market, allowing traders to easily buy and sell their desired crypto at their designated prices.
How do Makers impact the market?
Makers impact the market by influencing its liquidity. They create more options for other traders, allowing them to find matches for their trades more easily. This ensures a balanced and active market, and can help to decrease price volatility.
