The concept of Maker-Taker has now become an integral part of trading markets, especially when it comes to the digital cryptocurrencies. Understanding this concept is essential to properly contributing to the trading markets in an organic and rooted way.
To understand what makers and takers are, we must first understand market liquidity. Market liquidity is essentially a measure of how easy it is to buy or sell an asset at a fair value. Under market liquidity, the highest bid and the lowest ask tend to be very close to each other, resulting in a tight bid-ask spread. On the other hand, an illiquid market lacks this, thereby resulting in a higher bid-ask spread.
With regards to makers and takers, the terms refer to specific roles in a trading market. Makers are the traders who generate buying or selling orders that are not immediately processed. This, in turn, helps to increase the market liquidity by making it easier for buyers and sellers to meet. It is these makers who are responsible for producing the orders that make the market more efficient.
Takers, on the other hand, are the traders who take immediate advantage of the makers’ orders by instantly buying or selling the assets. In other words, they are the ones that fill the orders created by the makers.
Exchanges often employ the Maker-Taker fee structure. This means that the makers usually get rewarded with lower fees than the takers, as they are providing liquidity to the market. As a result, the market becomes more attractive to prospective traders, which reflects well on the particular exchange that implements the Maker-Taker fee structure.
In conclusion, it is evident that the Makers and Takers concept is vitally important to trading markets. Without them, the market would be an uphill struggle to be bought and sold, making it much more difficult for traders to achieve their desired prices. Through the Maker-Taker fee structure, the makers are incentivized to increase market liquidity, thereby increasing the efficiency of the trading markets. Thus, it is essential to understand this concept and it’s application to trading in order to rightfully take part in and contribute to the trading world.
