Market Makers, Spread and Liquidity

Spread, depth, slippage, maker/taker fees, market making agreements and wash trading: understand what makes a crypto market truly liquid.

Trading · Intermédiaire · 9 min read · Publié le September 28, 2026

The essentials

This guide is general information for educational purposes and does not constitute investment advice.

The order book in a nutshell

On a centralized exchange or an order-book perp DEX, each market has an order book: the list of all pending limit orders.

The bid is the highest price at which someone is willing to buy.
The ask (or offer) is the lowest price at which someone is willing to sell.
The mid price is the average of the two.

When you place a market order, you buy at the ask or sell at the bid. You are therefore "crossing" the book.

The spread: the invisible cost of every trade

The spread is the gap between the bid and the ask. If the best buyer is at 99.95 and the best seller at 100.05, the spread is 0.10, or 0.1% of the mid price. In jargon, people also talk about basis points (bps): 1 bp is 0.01%, so this spread is 10 bps.

This cost appears on no fee schedule, but you pay it. If you buy and then immediately sell at market, you lose the spread, on top of fees.

Orders of magnitude to keep in mind:

Major pairs (BTC, ETH against stablecoins) on large platforms often have a very tight spread.
Small tokens, exotic pairs and quiet hours have wider spreads.
The spread widens sharply during high volatility, precisely when many traders want out.

Depth: how much the market can absorb

A tight spread isn't enough. You also need to look at depth: the quantity available at each price level. A book can show a tiny spread with only a few hundred euros at the best price, and almost nothing behind it.

The market maker Flowdesk sums up the idea well: a 5 bps spread with only a few hundred dollars of liquidity is less healthy than a 30 bps spread with $100,000 of depth. For a trader, the right question isn't "what's the spread?" but "at what average price will my size be executed?"

A common measure is to add up the value of orders within 1% or 2% of the mid price, on each side of the book.

Slippage, illustrated

Slippage is the difference between the expected price and the price actually obtained. It appears when your order consumes several levels of the book.

A concrete example

Here is the sell side of a simplified order book, with a mid price of 100:

Price (ask)	Quantity available
100.05	2 units
100.10	3 units
100.20	5 units

You buy 8 units at market:

2 units at 100.05 = 200.10
3 units at 100.10 = 300.30
3 units at 100.20 = 300.60
Total: 801.00, i.e. an average price of 100.125.

Compared with the best ask displayed (100.05), you slipped by 0.075%. Compared with the mid price, your total execution cost is 0.125%, before trading fees. On a shallow market, the same order could cost several percent.

To limit slippage:

use limit orders rather than market orders when you're not in a hurry;
split large orders into several smaller ones, or use a TWAP order (execution spread over time) if the platform offers it;
avoid trading large sizes on illiquid pairs or during volatility spikes;
check the order book or the average price estimate before confirming.

Who are market makers?

A market maker is a participant who continuously places buy and sell orders on either side of the price. They earn mainly from the spread: buying a bit cheaper, selling a bit higher, thousands of times. In return, they bear inventory risk (holding an asset that can fall) and must adjust their prices very quickly.

Without them, order books would be empty much of the time and every order would move the price. They are often specialized firms using algorithms, but any trader who places a limit order plays a small part as a liquidity provider.

Maker and taker fees

Exchanges distinguish two types of orders, as Kraken's help center explains:

A maker order isn't executed immediately: it is added to the book and waits. It is typically a limit order placed below the current price for a buy.
A taker order is executed immediately against an order already in the book. Market orders, and stops that trigger at market, are taker orders.

Maker fees are generally lower than taker fees, sometimes zero or even negative (this is called a rebate, a discount paid to the maker) on some platforms or above certain volumes. The logic: the maker adds liquidity, the taker removes it.

For you, this means a strategy using limit orders pays both less spread and lower fees. In return, your order may never be filled if the price moves the other way.

Market making agreements at a token launch

When a new project launches its token, it often signs a contract with a market maker to ensure minimum liquidity from the start of trading. Two models dominate, according to Flowdesk.

The "retainer" model

The project lends the market maker both tokens and quote currency (for example USDC), and pays monthly fees. At the end of the contract, the market maker returns the entire loan. The project keeps control over the strategy and the choice of platforms, but bears the capital risk.

The "loan + call option" model

The project lends tokens to the market maker (often a percentage of the supply) and grants it a call option on those tokens at a pre-agreed price, called the strike. At expiry, the market maker can either return the tokens or exercise the option if the market price exceeds the strike, and pocket the difference. The market maker brings the capital for the buy side itself.

This model costs the project less cash, but it gives up part of the upside potential and leaves it with less control over how liquidity is deployed.

Why this concerns you

These agreements are rarely public. Yet a market maker holding a large quantity of borrowed tokens can sell some of them on the market, and the incentives tied to an option don't always align with the interests of small holders. When a project publishes its tokenomics, look for whether a "liquidity" or "market making" allocation is mentioned and on what terms. See also our guide on tokenomics and unlocks.

Wash trading: when volume is fake

Wash trading means buying from and selling to yourself (or between accounts controlled by the same person) to artificially inflate volume. The goal is to make a token look more active and more liquid than it is, to attract buyers or obtain a listing.

A documented case: the FBI operation in 2024

On October 9, 2024, the SEC and the US Department of Justice announced charges against several firms presented as market makers, including ZM Quant, Gotbit and CLS Global. According to the SEC, algorithms allegedly generated billions of dollars of artificial volume per day.

The DOJ specified that eighteen individuals and entities were charged, and that the FBI had created its own token (NexFundAI) as part of a sting operation: several of these firms allegedly agreed to provide wash trading for that token. According to the DOJ, a dashboard even let clients choose the daily volume of fake trades they wanted. More than $25 million in crypto was seized and several defendants pleaded guilty.

In Europe, the MiCA regulation prohibits market manipulation, including transactions that give false or misleading signals about the supply, demand or price of a crypto-asset.

Warning signs

Huge volume relative to market capitalization and the number of holders, with no news to explain it.
High volume but an empty order book: if millions trade every day, depth should keep up.
Very regular volume, hour after hour, without the natural peaks and troughs of a real market.
Repetitive trade sizes or transactions chained at the same price at fixed intervals.
Volume concentrated on little-known platforms, while regulated platforms show little activity.
A large gap between displayed volume and the actual number of transactions or active addresses on the blockchain.

None of these signs is proof on its own, but their accumulation should make you very cautious.

Mistakes to avoid

Judging a market by its volume alone: volume can be manufactured, depth much less easily.
Placing a large market order on an illiquid pair without looking at the order book.
Ignoring the spread in your cost calculations, especially if you trade often.
Forgetting that liquidity vanishes in a panic: the spread displayed in calm times is not the one you'll get in a crash.
Confusing maker and taker fees: a market stop pays the taker rate.
Buying a recently launched token without asking who provides its liquidity and on what terms.

Checklist before trading a pair

What is the current spread, as a percentage?
How much value is within 1% to 2% of the price, on each side?
What average price would I get for my size?
Can I use a limit order to pay the maker rate?
Is the displayed volume consistent with depth and on-chain activity?

Key takeaways

Liquidity is measured by spread and depth, not by volume alone.
Slippage depends on the size of your order relative to the book: calculate the average price, not the best displayed price.
Maker orders add liquidity and generally pay lower fees than taker orders.
Token launches often rely on market making agreements (retainer or loan + option) that are rarely public and can create selling pressure.
Wash trading exists and has been prosecuted: high volume with an empty order book is a warning sign.

Sources

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