What's the Difference Between Market Makers and Takers in Crypto?
Ever wondered how cryptocurrency exchanges manage to offer seemingly instant trades, 24/7, across thousands of different crypto assets? A big part of the answer lies in the dynamic interplay between two fundamental types of market participants: market makers and market takers. These roles are the lifeblood of any trading venue, ensuring there's always someone ready to buy when you want to sell, and vice versa.
The difference between market makers and takers is that makers provide liquidity by placing orders that wait to be filled, while takers consume liquidity by immediately executing trades against existing orders. Understanding this distinction isn't just for seasoned traders; it's crucial for anyone looking to navigate crypto more effectively. Knowing these roles can help you understand how liquidity is created, how prices are determined, and even how trading fees might differ based on your actions.
In this article, I'll discuss the role market makers and market takers play in the context of crypto trading, explore their pros and cons, and explain how you can become one on an exchange like VALR.
What Is a Market Maker?
In crypto, a market maker is an individual or entity that provides liquidity to an exchange by placing buy and sell orders that are not immediately matched. Essentially, they "make a market" by signalling their willingness to trade at specific prices, adding depth to the order book. When you look at an exchange's order book, you're seeing the limit orders placed by market makers - offers to buy (bids) and offers to sell (asks) various cryptocurrencies at particular price points.
A market maker's buy order (bid) will typically be lower than the lowest current sell order (ask), and their sell order (ask) will be higher than the highest current buy order (bid). Because their orders don't execute instantly, they must wait for another market participant (e.g. a market taker) to come along and accept their price. This willingness to wait and provide standing orders is what creates liquidity, making it easier for others to trade immediately.
For example, imagine you want to buy Bitcoin (BTC) on VALR using USDT, but you believe the current market price is slightly too high. You decide to place a limit order to buy 1 BTC at 100,000 USDT, while the lowest current sell offer (the best ask price) on the BTC/USDT order book is 100,050 USDT. Your 100,000 USDT buy order doesn't fill immediately; instead, it gets added to VALR's BTC/USDT order book.
By doing this, you are acting as a market maker, adding liquidity and giving other traders an option to sell their BTC to you at your specified price if the market moves. On VALR, market makers are incentivised to provide this crucial service. For instance, on spot crypto-to-crypto pairs like BTC/USDT, depending on your trading volume tier on VALR, maker fees are 0.08% on the lowest tier, which can decrease down to 0.00% for the highest tier. This means you pay a very small fee or no fee for your order to be filled as a maker.
Market makers can range from large, sophisticated trading firms and institutions employing high-frequency trading algorithms to individual retail traders who strategically place limit orders. Their collective actions narrow the bid-ask spread (the difference between the highest bid and lowest ask), which benefits all traders by making transactions more cost-effective.
Market Makers: Pros and Cons
Being a market maker comes with distinct advantages and potential drawbacks, as listed in the table below:
| Pros | Cons |
|---|---|
| Lower trading fees | Order may not fill immediately |
| Potential earnings from the bid-ask spread | Exposure to volatility while waiting for the order to get filled |
| Contributes to market liquidity and health | Can be capital-intensive for significant impact |
| Can be a part of a passive trading strategy | Risk of unfilled orders if the market moves away |
| Incentivised by exchanges (like VALR) | Managing multiple open orders can become complex |
| Greater control over the execution price |
What Is a Market Taker?
A market taker, in contrast to a maker, is a trader who seeks immediate execution for their buy or sell order. Instead of placing an order and waiting for it to be filled, a taker "takes" an existing order from the order book that has been placed by a market maker. Their primary goal is speed and certainty of execution at the best currently available price.
When you place a market order (an instruction to buy or sell immediately at the current market price), you are acting as a market taker. Your order is instantly matched with the best available limit order(s) already on the order book.
For example, if the best sell offer for BTC on VALR's BTC/USDC order book is 1 BTC for 100,050 USDC, and you place a market order to buy 1 BTC, your order will immediately fill by taking that 100,050 USDC offer. On VALR, taker fees for spot crypto-to-crypto pairs like BTC/USDC start at 0.100% for Tier 1 users and decrease with higher trading volumes down to 0.035%.
It's important to note that you can also be a market taker even when using a limit order. If your limit buy price is at or above the lowest ask price, or your limit sell price is at or below the highest bid price, your order will likely execute immediately against an existing maker order, and you'll be considered a taker for that trade. Market takers consume liquidity from the market.
Market takers prioritise getting their trade executed quickly over potentially getting a slightly better price by waiting. This is common for traders reacting to news, looking to enter or exit positions fast, or those who simply prefer the convenience of immediate execution.
Market Takers: Pros and Cons
Opting to be a market taker also has its own set of pros and cons:
| Pros | Cons |
|---|---|
| Immediate order execution | Higher trading fees |
| Certainty that the trade gets filled | Potential for price slippage on larger orders |
| Simple order placement via market orders | Less control over the exact execution price |
| Comes in handy for reacting quickly to market movements and events | Consumes market liquidity |
| No need to wait for the price to match | With patience, the trader could get a better price as a maker |
| Suitable for urgent trades |
How to Become a Maker or a Taker on VALR
The good news is that it's super easy to become a market maker or a taker on VALR. Follow these simple steps to get started:
Create an Account: Sign up for a VALR account if you don't already have one.
Verify Your Account: Pass Know Your Customer (KYC) to enable all trading features on your account.
Deposit Funds: Fund your account with fiat currency or cryptocurrency.
Place an Order:
Market Makers: Place a limit order at a price that is not immediately matchable. For a buy order, set your price below the current lowest ask. For a sell order, set your price above the current highest bid. Your order will be added to the order book. You can also use the "Post-only" option when placing a limit order (if available) to ensure it only acts as a maker order and doesn't execute immediately if it could match an existing order.
Market Takers: Place a market order to buy or sell at the best currently available price. Alternatively, place a limit order at a price that can be immediately matched (e.g., a limit buy order at or above the lowest ask, or a limit sell order at or below the highest bid).
Ready to get started?
Frequently Asked Questions
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You can identify market makers by looking for limit orders on the order book that are placed away from the current market price and remain open until someone else takes them. They provide standing offers to buy (bids) and sell (asks) at specified prices rather than executing instantly.
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Market makers work by placing limit orders at different prices, creating buy and sell opportunities in the order book. They wait for other traders (market takers) to match their orders, which adds liquidity to the market. In return, they often pay lower trading fees and may earn from the bid-ask spread.
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Crypto market makers can be large trading firms, institutions using high-frequency algorithms, or individual traders who place strategic limit orders. Their main goal is to keep markets liquid by continuously offering to buy and sell crypto assets.
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Neither is strictly better—market makers usually get lower fees and can earn from the spread but need patience and may risk price movement. Market takers prioritize speed and certainty of execution, paying higher fees for immediate trades. The best choice depends on your trading style and objectives.
Risk Disclosure
Trading or investing in crypto assets is risky and may result in the loss of capital as the value may fluctuate. VALR (Pty) Ltd is a licensed financial services provider (FSP #53308).
Disclaimer: Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
