Like regular stocks, commodities, and foreign exchange markets, the cryptocurrency market requires buyers, sellers, and brokers to make transactions happen on the exchange. The prices at which a crypto trader can buy a digital asset largely depend on its supply and demand, which in turn are set by the market maker.

Crypto market making involves the process of buying and selling large amounts of a particular cryptocurrency asset to facilitate liquidity and ensure the smooth running of financial markets.

Market makers are high-volume traders that literally "make a market" for securities by always standing at the ready to buy or sell, thereby providing the market with liquidity and depth.

Although market makers can be members of an exchange or sole individuals, they share a common trait; they buy and sell digital assets for their personal accounts.

However, due to the high volume of crypto they deal in, large institutions often undertake market making as well.

For every cryptocurrency bought or sold, there has to be another person on the other end of the transaction. For example, if you want to sell your Bitcoin for $1,000, you have to find another person who is willing to buy $1,000 worth of Bitcoin. Because it is unlikely that you would find someone ready to sell that amount at the time you want, market makers fill in the void.

So, when you place your order, a market maker will buy your Bitcoin for $1,000, even when they do not have a client to sell your Bitcoin to right away. Thus, this reduces the wait time involved in buying and selling cryptocurrencies. When the order is more than what a single market maker can buy or sell, multiple market makers on the exchange are allowed to quote their prices on the order.

If you're interested in market making via your own exchange, then consider working with Yellow Capital. We provide organic market growth strategies including crypto market making, algorithmic trading, liquidity, token growth, exchange listing, and more. 

Market makers in crypto are now automating the process of setting bid and ask prices, using market making software, which helps crypto market makers and cryptocurrency exchanges to populate their order books with relevant bid-ask orders at a high level, offering a tight spread, and without worrying about the potential lack of liquidity on their platform.

The automation helps market makers to almost instantaneously adjust their quotes in response to changes in the crypto market. However, human beings are limited by the pace at which they can work. In addition, automated systems have been found to be more efficient than human beings in detecting and responding to risk-oriented events.

Using automated systems for market making in crypto ensures faster response time for setting bid and ask prices, scalability, and offering 24x7 availability for traders.