When trading on a cryptocurrency exchange, you might wonder how thousands of different assets are matched for trades almost instantly, around the clock. A key reason lies in the dynamic interaction between two core types of market participants: market makers and market takers.
These roles are the lifeblood of any trading platform, ensuring that when you want to sell, there’s likely someone ready to buy, and vice versa.
In essence, a market maker provides liquidity by placing limit orders that aren't immediately filled, while a market taker consumes liquidity by executing orders against existing ones. Knowing the difference isn't just for professional traders—it's essential for anyone who wants to operate more efficiently in the crypto market. Understanding these roles gives you insight into how markets function, how prices are formed, and even why you might pay different fees based on how you place orders.
This article explores the differences between makers and takers, their respective advantages and disadvantages, and how you can adopt either role on a trading platform.
What Is a Market Maker?
In cryptocurrency trading, a market maker is an individual or institution that provides liquidity to the market by placing buy or sell orders on an exchange that are not immediately executed. Essentially, by indicating a willingness to trade at specific prices, market makers add depth to the order book and help "make the market."
The limit orders you see in the exchange’s order book—both bids (buy orders) and asks (sell orders)—are placed by market makers. For example, a market maker might place a bid to buy Bitcoin slightly below the current lowest sell order, and an ask to sell just above the highest buy order. Since these orders aren't filled right away, they wait until other traders (market takers) accept these prices.
Suppose you want to buy BTC with USDT but believe the current market price is too high. You could place a limit buy order for BTC at 100,000 USDT while the lowest available sell order is 100,050 USDT. Your order won't execute immediately. Instead, it rests in the order book until the market price reaches your specified level. At this point, you are acting as a market maker and adding liquidity.
Many platforms encourage this behavior by offering reduced or even zero fees for market makers. Depending on your trading tier, maker fees on spot markets often start as low as 0.08% and can go down to 0.00%.
Market makers can be large high-frequency trading firms, institutional algorithms, or even retail traders using strategic order placement. Together, their activities help narrow the bid-ask spread, leading to a more efficient and liquid marketplace.
Pros and Cons of Being a Market Maker
Advantages:
- Lower trading fees
- Potential to profit from the bid-ask spread
- Contributes to market health by providing liquidity
- Enables passive trading strategies
- Offers greater control over execution price
- Often eligible for platform incentives and rebates
Disadvantages:
- Orders may not be filled immediately
- Exposure to price volatility while waiting
- May require significant capital to make an impact
- Risk of non-execution if the market moves away from the order price
- Can be complex to manage multiple open orders
What Is a Market Taker?
A market taker is a trader who wants to execute a buy or sell order immediately. Instead of waiting for their order to be matched, they “take” existing orders available in the order book.
When you place a market order—which executes instantly at the best available market price—you are acting as a market taker. This type of order automatically matches with the best-priced limit orders currently available.
For example, if the best ask price for BTC is 100,050 USDC and you place a market order to buy 1 BTC, your order will be filled immediately at that price.
On most platforms, taker fees are higher than maker fees. For instance, taker fees often start around 0.10% for standard users and can decrease with higher trading volumes.
It's worth noting that even limit orders can sometimes act as taker orders. If you place a limit buy order with a price equal to or higher than the current best ask, it will execute immediately, making you a market taker in that instance.
Market takers prioritize speed and execution certainty over waiting for a better price. This approach is common during periods of high volatility or when reacting quickly to news is essential.
Pros and Cons of Being a Market Taker
Advantages:
- Orders are filled immediately
- No waiting for price levels to be reached
- Simple and fast—ideal for quick actions
- Useful for entering or exiting positions urgently
- Suitable for fast-moving market conditions
Disadvantages:
- Higher trading fees
- Large orders may experience slippage
- Less control over the exact execution price
- Consumes rather than provides liquidity
- May result in less optimal pricing compared to patient order placement
How to Be a Maker or Taker on an Exchange
Becoming a market maker or taker is straightforward on most modern trading platforms. Here’s a general step-by-step guide:
- Register an account: Sign up and complete the required identity verification (KYC) process.
- Deposit funds: Transfer fiat or cryptocurrency into your account.
Start trading:
- To be a market maker: Place limit orders with prices set away from the current market price. For example, set a buy order below the current best ask or a sell order above the best bid. Your order will enter the order book and add liquidity. Some platforms offer a "post-only" option to ensure your order only acts as a maker.
- To be a market taker: Use market orders for immediate execution. Alternatively, place limit orders with prices that match or cross the current market price, which will execute immediately.
Whether you decide to make or take liquidity, having a clear strategy is essential. 👉 Explore more trading strategies
Frequently Asked Questions
How can I identify market maker activity in an order book?
You can often spot market makers by looking for limit orders placed at prices significantly away from the current market. These orders usually remain open for longer periods and provide consistent buy or sell interest, adding depth to the order book.
How do market makers earn profit?
Market makers profit from the bid-ask spread—the difference between the price they are willing to buy at and the price they are willing to sell at. They may also receive fee discounts or rebates from exchanges for providing liquidity.
Who can become a market maker in crypto?
Market makers can be both institutional players (such as trading firms using algorithms) and individual traders. What matters is the willingness to place limit orders that provide liquidity to the market.
Which is better: being a maker or a taker?
There’s no definitive answer. Makers usually benefit from lower fees and better price control but must accept delayed execution and volatility risk. Takers get immediate execution but pay more in fees and may experience slippage. Your choice should reflect your trading goals and style.
Can a limit order become a taker order?
Yes. If a limit order is placed at a price that matches or crosses the current market price (e.g., a limit buy at or above the best ask), it will execute immediately and be treated as a taker order.
Do all exchanges offer maker/taker fee models?
Most major exchanges use a maker-taker fee structure, but some may offer flat fees or other pricing models. Always check the fee schedule of your chosen platform.
Risk Disclosure: Trading cryptocurrencies carries a high level of risk due to market volatility. The value of investments can fluctuate, and you may lose your capital. Always conduct your own research and consider seeking advice from a financial professional before trading.