Liquidity Provider vs Market Maker: Is There Any Difference?

Liquidity Provider vs Market Maker: Is There Any Difference?

Over the past years, the market of digital assets underwent probably the greatest changes in its existence. Starting from 2021, large companies started to actively tap into the crypto sector. These are technological companies like MicroStrategy and Tesla, as well as big banks like Morgan Stanley, BNY Mellon, and Citigroup, payment processors like PayPal, etc.

Companies invest billions of dollars in crypto, so they require a safe and legal environment for institutional crypto trading. Large platforms like Binance, WhiteBIT, and other popular exchanges have departments for VIP or institutional customers and provide sufficient liquidity, protection, custody services, and compliance. In addition, institutional investors and businesses are offered sophisticated trading tools, affiliate programs, and services on their own tokens listing. 

Large financial entities that participate in crypto trading play a crucial role in ensuring liquidity, as they pour large trading volumes into the market. It creates a stable market where trades are conducted smoothly and quickly. To provide liquidity and make a profit from it, investors should partner with a market-maker crypto exchange.

There are two ways to ensure liquidity in the market:

- engage in crypto market making;

- become a liquidity provider.


What is a Liquidity Provider (LP)?

That may be financial companies, banks, or non-bank financial institutions that serve as a facilitator of trade. With their help, traders conduct trades efficiently and quickly. LPs place orders for both buying and selling assets, ensuring there is sufficient supply and demand in the market. 


Market Making in Cryptocurrency

They are connecting buyers and sellers on a crypto platform. Same as LPs, they place bid and ask prices on specific trading pairs, and are always ready to buy or sell them at the quoted rates. This ensures a stable flow of transactions in the market. 

So the difference between LPs and market makers lies in their approach - LPs ensure there are enough buyers and sellers; market makers are more actively participating in trades acting as connectors between buyers and sellers.



The crypto market got a huge “push” as institutional investors stepped in. They, in turn, contribute to the market’s liquidity and maturity by injecting large trading volumes. There would be no smooth and efficient transaction flow without market-making in crypto. In fact, these market players contribute to the overall health and stability of supply and demand for institutional crypto trading.


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