The Role of Crypto Market Makers in Bull vs Bear Markets

Crypto markets are famously volatile, cycling between euphoric bull markets and painful bear markets. Through these ups and downs, crypto market makers play a crucial stabilising role in the industry. Market makers are essentially liquidity providers, entities that continuously buy and sell assets to ensure there’s always someone on the other side of a trade. Their core role is to maintain sufficient trading liquidity for tokens under all market conditions. In a bull frenzy or a bear slump, market makers keep order books active, trades flowing and prices relatively orderly. This article explores how crypto market makers operate in bull vs. bear markets, while highlighting why their work is indispensable for exchanges, projects and investors alike.

Bull vs. Bear Markets at a Glance

Before diving into market makers’ roles, it’s worth clarifying the market environments they operate in. A bull market refers to an extended period of rising prices and optimism. In crypto, bull runs often feature surging trading volumes, tight spreads and a flood of new participants chasing gains. By contrast, a bear market is a prolonged downturn marked by falling prices, pessimism and retrenchment. Trading activity typically dwindles in bear phases as many traders exit or trade cautiously. These dramatically different conditions influence how market makers behave and what strategies they employ. In essence, bull markets create a liquidity boom, high demand and abundant capital, whereas bear markets suffer a liquidity crunch, with fewer active buyers and sellers. Market makers must adapt to both scenarios to fulfil their mission of providing liquid and efficient markets.

Market Makers in Bull Markets: Fueling Growth and Managing FOMO

During bull markets, market makers serve as the backbone that enables exponential growth in trading activity. When prices are climbing and investor sentiment is exuberant, market makers provide the depth and liquidity needed to handle the surge in buy orders and new market entrants. In fact, the dominance of top exchanges during crypto bull runs wouldn’t be possible without professional market makers underpinning their order books. These firms continuously quote buy/sell orders so that even large trades can be executed quickly and with minimal slippage, whether it’s a modest $50 altcoin trade or a $5 million BTC swap. By narrowing bid-ask spreads and absorbing big orders, market makers keep markets efficient in the face of rapid price increases.

Importantly, market makers also help stabilise volatility in overheated markets. As prices go parabolic, they strategically sell into rallies and buy on pullbacks, which can prevent extreme spikes or crashes. Their activity can smooth out price surges, preventing sharp corrections after sudden run-ups and protecting traders from impulsive FOMO buys at the top. In other words, a good market maker provides a counterbalance to the frenzy by ensuring continuous liquidity. This means traders can enter or exit positions without sending the price wildly higher or lower. This stabilising influence benefits the overall market by curbing excessive volatility and promoting orderly price discovery.

However, not all market maker behaviour in bull markets is purely passive. Some market makers (especially less scrupulous actors) may actively amplify bullish sentiment. During an upward-trending bull market, there are instances where market makers attempt to trigger FOMO (fear of missing out) among investors. By aggressively bidding up prices or quickly filling large buy orders, they can create an impression of insatiable demand, enticing more traders to buy in. Most retail traders who chase the hype end up buying at inflated prices, which ultimately benefits those market makers offloading inventory at a profit. Such tactics border on market manipulation, and reputable firms avoid overt price pumping. The reality is that ethical market makers focus on liquidity and stability rather than pushing directional prices. As one industry expert noted, great market makers aim to “help ensure the health of the crypto market” by backing liquidity, narrowing spreads and ensuring fair, orderly trading, instead of directly influencing prices.

In summary, bull markets see market makers playing offence: they facilitate the trading boom by providing deep liquidity on fast-moving assets, keep spreads tight despite surging volume, and often mitigate wild swings even as prices climb. This ensures that exchanges can handle the flood of activity and that token projects can ride the wave of interest without their markets becoming dysfunctional. With experienced market makers behind the scenes, trades large and small can be executed smoothly during the frenzy of a crypto bull run.

Market Makers in Bear Markets: Sustaining Liquidity and Confidence

When the market turns bearish, the role of market makers becomes even more critical in many ways. Bear markets are characterised by low enthusiasm, shrinking volumes, and wider bid-ask spreads as buyers become scarce. In these conditions, market makers act as the lifeline that prevents markets from seizing up entirely. They continue to quote buy and sell orders even when few others are willing to trade, ensuring that assets remain tradeable. History shows that during severe crypto downturns, liquidity can evaporate; for instance, in the 2022 bear market, crypto liquidity dried up significantly and retail trading volumes plummeted across exchanges. This makes the presence of market makers indispensable: they step in to provide liquidity when natural market activity is insufficient, keeping order books from going empty.

A key role for market makers in a bear market is to maintain reasonable spreads and market depth despite the overall risk-off sentiment. By continuing to place limit orders on both sides (albeit often at adjusted prices), they help avoid situations where a single sell order crashes the price due to no buyers. Market makers essentially stabilise volatile markets by curbing sudden price swings and cushioning sharp falls. This stabilising effect is crucial for retaining what confidence remains among investors. If every attempted sale led to a free-falling price, panic would only intensify. But with professional liquidity providers in the mix, even in gloomy times, there’s a buyer for every seller (though at a price that accounts for the heightened risk). This fosters trust that the market is still functional and not completely frozen, which can encourage long-term participants to stay engaged.

Another strategy shift in bear markets is that savvy market makers may take a longer-term view by accumulating assets at depressed prices. While in bull phases, they were offloading inventory into strength, in a bear phase, their task often flips; some will deliberately instil fear (through sizable sell orders or pessimistic sentiment) to drive prices lower, prompting weaker hands to sell. At the same time, those market makers quietly buy up those cheaply dumped tokens, positioning themselves for profits when the market eventually recovers. In essence, in bearish conditions, market makers with sufficient capital act contrarian: providing bids when others are panic selling. This helps form a price floor and later yields gains as markets normalise. Of course, this practice walks a fine line; if done in collusion or with deceit, it veers into manipulation. Legitimate market makers simply follow their algorithms and risk models, which naturally tend to buy low in oversold conditions and sell high in overbought ones, thereby providing liquidity throughout the cycle.

It’s worth noting that prolonged bear markets also test the resilience of market makers themselves. Many firms that thrive in bull markets struggle when trading activity and revenues dry up. In fact, the brutal 2018 crypto winter wiped out numerous smaller market makers and exchanges that couldn’t survive on thin volume. More recently, the collapse of a major exchange (FTX) in late 2022 forced the exit of its affiliated market maker and led to a sudden liquidity vacuum. Global crypto liquidity was cut roughly in half within a week of FTX’s collapse, with Bitcoin’s order book depth plunging from hundreds of millions of dollars to under $100 million. This dramatic example underlines how dependent the market is on market makers. When a big provider pulls back during a crisis, liquidity can vanish overnight. The top surviving market makers in 2023-2024 became much more cautious after these events, focusing on risk management and capital efficiency to weather the storm. Many also used the quieter period to forge new partnerships, improve their algorithms and prepare for the next bull run, as evidenced by firms like Gravity Team and others continuing to invest in infrastructure through the downturn.

In summary, bear markets see market makers playing defence: propping up liquidity in thin markets, preventing free-fall volatility, and sometimes accumulating positions that will pay off in the future. By doing so, they uphold a baseline of market functionality. This benefits crypto projects (their tokens remain reasonably liquid and don’t utterly collapse), exchanges (trading fees and activity persist, albeit lower), and investors (they can still find a counterparty to trade with). The presence of diligent market makers is a big reason why, even in a deep bear market, one can usually get a trade executed, something that absolutely preserves a level of trust in the crypto ecosystem when optimism is hard to come by.

Adaptation, Ethics and Outlook

Whether in bull or bear phases, crypto market makers must constantly adapt their strategies to changing market sentiment. In bullish times, they might expand liquidity provision aggressively, whereas in bearish times, they scale back risk and concentrate on efficiency. The best market makers actively manage their inventory and exposure so that they can quote continuous prices without taking on fatal losses. It’s a delicate balancing act of providing enough liquidity to keep markets healthy, yet protecting themselves from being on the wrong side of violent price moves. As one report highlighted, a “healthy market making business” focuses on simply quoting buy/sell prices to facilitate trades and maintain stability, rather than chasing massive profits by moving the market. In practice, this means ethical market makers operate neutrally, earning primarily from the bid-ask spread and exchange rebates, while avoiding dramatic directional bets.

Transparency and ethical conduct are increasingly important in this field. Reputable market makers steer clear of practices like wash trading or colluding to manipulate prices, as these are illegal and harm the market’s integrity. Crypto exchanges also keep watch and will ban market makers or delist tokens if they detect egregious price manipulation. The ideal scenario is a market maker who “earns when its customers earn”, aligning with projects and exchanges to grow the market sustainably rather than profiteering at the expense of retail traders. Encouragingly, many of the prominent crypto liquidity providers now position themselves as long-term partners to token projects, emphasising support with tokenomics, exchange listings, and stability over simply generating trading volume. This professionalisation trend is set to continue, especially as regulators pay more attention to market making activities in crypto.

Looking ahead, crypto market makers will remain key players in both bull and bear markets. They are the unsung market stabilisers that make price discovery possible even in extreme conditions. For blockchain startups and exchanges, partnering with a capable market maker (such as Gravity Team or similar firms) can be the secret weapon to survive and thrive across market cycles. By ensuring liquidity when it’s needed most, during frenzied rallies and liquidity droughts alike, market makers contribute greatly to the maturity and resilience of the crypto asset class.

Further Reading

• Foresight News (2025) – The Secret Dealer: The Rise and Fall of Crypto Market Makers, ChainCatcher (chaincatcher.com) (Insight into the core role of market makers and how liquidity vanished after a major collapse.) 
• CryptoSlate News (2024) – Market Makers, Blockchain Project’s Secret Weapon (coinmarketcal.com) (Explains how market maker strategies shift in bull vs. bear trends and highlights ethical market making practices.) 
• Binance News (2024) – Understanding Market Makers: Their Role and Influence (binance.com) (Describes how market makers may induce FOMO in bull markets and fear in bear markets to profit from market sentiment.) 
• Gate.io Research (2025) – Crypto Market Makers: Risks and Challenges (gate.com) (Highlights the difference between manipulative vs. neutral market making and the need for better oversight in the industry.)