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+--- Thread: How Is Liquidity Sustained on a Crypto Exchange Using Market-Making Bots? (/thread-16452.html)
How Is Liquidity Sustained on a Crypto Exchange Using Market-Making Bots? - carolinemax - 08-08-2025
A market-making bot plays a crucial role in maintaining liquidity on a crypto exchange by continuously placing buy and sell orders. This ensures that traders can easily enter or exit positions without causing major price fluctuations, which enhances market efficiency and stability. Here’s how it works:
- Placing Limit Orders: The bot consistently places buy (bid) and sell (ask) orders at different price levels, creating a balanced order book.
- Tight Spread Maintenance: It maintains a narrow bid-ask spread, making trading more attractive to users and encouraging higher trading volumes.
- Instant Order Matching: By providing ready-to-fill orders, the bot helps execute trades instantly, reducing slippage for traders.
- Automated Adjustments: The bot uses real-time data to adjust prices and volumes dynamically, keeping liquidity stable even during volatile conditions.