A regular market has to have an inflow and outflow of traders. There are people who determine prices and those that accept prices. In a local grocery market, for example, the seller sets the price and the buyer accepts the price.
Analogy 1: A store creates prices and a buyer accepts the prices. Therefore, the store is the market maker and the buyer is the market taker.
Analogy 2: "As if pulled straight out of a 1940’s comic book, the title “Market Maker” belongs up there with The Joker and Two-Face as super villains in Batman. In fact, many investors often regard the Market Maker (MM) as an evil figure manipulating stock or crypto prices and preventing anyone from gaining a profit but themselves. However, when equipped with a detailed insight into a MM’s actual purpose, it becomes clear to see what a MM actually does and why their role is so crucial to the share trading world." ~William Wells
Who is a Market Maker and Market Taker in Cryptocurrency?
Market Maker - Makes Prices
Market Taker - Accepts Prices
The makers make selling and buying orders that are not executed immediately, for example, "sell BTC when the price hits $15k.” This brings about liquidity, in that, people can immediately buy or sell when the price is favourable or the conditions are met. On the other hand, takers are the people that instantly sell and buy; they fill the orders that makers have made.
Sellers are matched with buyers on any type of exchange; wether cryptocurrency, stocks, or Forex. Minus such kinds of meetings, traders would be forced to advertise their offers to exchange Bitcoin for Ethereum on social media platforms with the hopes that someone will be interested and buy.
Therefore, The makers and takers are an important part of the market and their presence or absence separates weak exchanges from strong ones.
Market Makers
An order book is usually used by exchanges to calculate an asset's market value and in the process, they collect all offers of selling and buy from users. For example, you can submit an instruction like Buy 700BTC at $3000. It will be put in the order book and filled when the price gets to $3000.
It is a requirement for makers to announce their maker order first-hand by putting them in the order book. The exchange is similar to "a grocery store that charges a fee to individuals to put goods on the shelves, and you’re the person adding your own inventory."
Most people that mostly take on the role of makers in the market are institutions and traders.
"If you want to make sure the order goes into the order book before it is filled, please select “Post only” when placing your order (currently only available on the web version and desk version)," says Binance experts.
It is not a guarantee that using a limit order will make it a market order. Please choose "Post Only" when placing your order if you want your order to be placed in the order book before it is filled.
Market Takers
Like stated earlier, takers buy and sell instantly and this is made possible by makers providing them with Liquidity. If you have ever placed an order on any cryptocurrency exchange, then you have acted as a taker.
Placing an order in the order book provides liquidity for the takers because an order book makes it possible for takers to buy and sell when the condition is met.
Note that one can also be a taker when they use limit orders and not just market orders. Besides, you are a taker if you fill somebody's else's order whether it is a limit order or a market order.
Market-taker Costs
Market-taker structure is different in every cryptocurrency platform. By charging market-taker fees, exchanges get a considerable amount of their revenue.
Traders pay a small amount of fee when they make an order and it is used. The cost varies depending on the platform and trading role and size.
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