Market makers: Hidden whales controlling crypto markets

At first glance, the crypto market looks chaotic: price surges, sharp reversals, unexpected crashes. But behind this appearance of randomness lies a well-organized control system, centered around market makers. They are not just market participants; they are professional players with billion-dollar budgets who work closely with exchanges and use algorithmic trading to extract incredible profits. Ordinary traders often don’t even realize that their trades are unfolding on a field where the rules are set by market makers.

Dual Nature: From Liquidity Providers to Manipulators

To understand how market makers dominate the market, it’s important to grasp their official role. Market makers are specialized participants who place buy and sell orders simultaneously, creating the illusion of an active market. They profit from the spread—the difference between buy and sell prices—as well as from price movements of assets.

But market makers are not the only liquidity providers. This category also includes regular users of decentralized platforms like Uniswap, who simply earn fees from liquidity pools. What’s the main difference? While market makers actively manipulate orders and positions to profit from chaos, ordinary LPs passively wait for fee income. Market makers are aggressive hunters, whereas regular liquidity providers stand aside.

Five Ways Market Makers Ruin the Market and Traders

Behind the direct mechanics of market maker operations lies a whole arsenal of manipulations designed to maximize profits from crowd movements.

Spoofing: Creating a Mirage of Demand. Market makers place huge buy or sell orders that will never be executed. The goal is simple: to create the impression that the market is moving in a certain direction. For example, a market maker places an order to buy 1,000 BTC at $40,000. Retail traders see this huge demand and start buying, pushing the price up. When the price rises, the market maker instantly cancels their large order and sells their actual assets at a higher price. Retail traders are left at a loss.

Pump and Dump: Coordinated Pumping. When market makers act in concert (which happens often), they start buying an asset en masse, creating the illusion of growing interest. This attracts a wave of ordinary traders who fear missing out on the rising trend. Once the price peaks and retail traders invest heavily, market makers start selling, crashing the price and leaving newcomers with empty wallets.

Stop Hunt: Targeted Liquidation of Positions. Market makers have access to data on where other traders’ stop orders are set. They use this information as a weapon. If they see a cluster of stop-losses at $40,000 for BTC, they deliberately push the price down to that level, triggering hundreds of stops simultaneously, gathering liquidity from desperate sellers at low prices, then quickly reversing the market.

Wash Trades: Creating Fake Volume. Market makers buy and sell the same asset simultaneously, creating the impression of high trading activity. This attracts new participants who think something interesting is happening. While ordinary traders join in, market makers already hold advantageous positions and are ready for the next move.

Spread Manipulation: Managing Accessibility. Market makers control the difference between buy and sell prices. If they want to raise the price, they narrow the spread, making buying more attractive. To lower the price, they widen the spread, making purchases harder and causing panic among sellers.

Whales Behind the Orders

Market makers are not just individual traders; they are specialized companies with access to enormous capital and advanced algorithms. Among the main players controlling millions of dollars daily are:

Jump Trading, which owns one of the fastest trading algorithms in the world and wields huge influence in both crypto and traditional markets. Citadel Securities controls a significant portion of all trading volume on stock and crypto markets, essentially acting as an invisible intermediary between you and the market. Jane Street is known for its ability to find micro-arbitrages and profit from tiny price movements. Alameda Research, before collapsing with FTX, was the largest market maker in the crypto industry, with access to internal exchange data.

Behind each market maker are often large hedge funds, venture funds, or exchanges themselves, financing these operations for commissions and market control.

Silent Agreements as a Tool of Power

Market makers on centralized exchanges almost always sign non-disclosure agreements (NDAs). This is not just bureaucracy—it’s a control tool. Market makers gain access to confidential information that ordinary traders will never see: trading volumes before they are made public, other participants’ orders, plans for listing new tokens, API parameters.

Thanks to NDAs, market makers can operate with full confidence that their methods will remain hidden. If a market maker knows that a new token will be listed on an exchange tomorrow, they can prepare their positions in advance. Market makers’ activities remain a dangerous but covert practice.

How Market Makers Operate in Practice: A Real Scenario

Imagine a new token is about to launch on a crypto exchange. Here’s how market makers act in this scenario:

First, the exchange contracts a professional market maker to ensure liquidity at launch. The market maker receives most of the tokens at a pre-agreed price, significantly below market value. At the opening of trading, the market maker places large buy and sell orders, creating a narrow spread and giving the impression of a stable market. Thanks to the market maker, the price fluctuates within a tight range, and ordinary traders see a “healthy” market.

At the same time, the market maker may cautiously start selling their additional tokens to retail traders who just heard about the new asset. The market maker profits not only from fees and the spread but also from the difference between the low purchase price (for them) and the higher selling price to retail traders. Afterward, the market maker can remove the main supporting orders, and the market enters volatility, causing ordinary participants to lose money.

The Core of the Game: Why Market Makers Are Invulnerable

Market makers are whales hiding in the shadows. They seem like useful market participants providing liquidity and stability. In reality, market makers are the main beneficiaries of asymmetric information and technological advantages.

An ordinary trader only sees what appears on their exchange screen. Market makers see the entire market, know about upcoming listings, see competitors’ orders, and understand capital flows. They have algorithms that operate faster than human reaction. They have connections within exchanges that give them privileged access.

So, when you see an unexpected crash or surge in price, remember: it’s most likely not market “will,” but carefully planned moves by market makers who have earned millions at your expense.