What is crypto market maker and taker?

What is crypto market maker and taker?

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Makers & Takers

Every thriving market has makers and takers, it´s what keeps the market balanced without being disadvantageous to any party.

Understanding market maker and taker is important. When you place your order you will have to choose whether to be a maker or a taker. And according to your choice you will pay a different fee.

Usually maker fees are much lower than takers fees.

At Kraken for example takers fees can start at 0,26% and they can go as low as 0,10%. And maker fees start at 0.16% and it can go as low as 0%.

But why so such difference in the fees?

Because Takers take away liquidity, and Makers provide liquidity for the order book.

The words Maker and Taker are related to the ORDER BOOK. To better understand the concept, you need to know the order book. This is a collection of all orders within an exchange.

Takers are participants of the markets that agree with the current listed prices. They do so because they wish to fulfill their orders immediately, and all market orders execute instantly. 

In other words, takers always seek to match the current prices in order to process their transaction right away. This means they take away liquidity from the orders book.

Makers however, place orders with prices that are different from the current market. Therefore, the orders take longer to get off the market. By doing this they are adding on to the orders book and generating liquidity.

They usually try to sell for higher prices and buy for lower prices. So, if you make an order with a price that is different from what the market is offering at the time then you are a market maker.

Good to note that, in the crypto-world, market makers choose limit orders. Furthermore, market orders never make the limit order list.

So, at the moment you place your order, according to your choice in price whether to match the market or not, you automatically become a taker or a maker. And that will define your fees, which are usually paid once the order executes. 

In some exchanges market makers can actually make fees, while takers pay fees.

Market orders = market takers.

Limit orders = market makers.

Conclusion: This is a simple yet, important concept because the crypto industry lacks liquidity at the moment. By having a maker-taker structure, and by offering lower fees for makers as an incentive, exchanges are achieving that liquidity flow. This also helps to and keep a percentage of traders on the makers-lane.

The Winco Team


Disclaimer: Our team works hard to bring you the best content in the cryptocurrency market, but it is only our point of view and not legal advice, and may be divergent from other opinions, so please do not make any decisions without concluding studies of your own to understand the profit possibilities and uncertainties involved at your own risk.

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