Market Makers make two-sided markets in financial assets. It is no different in DeFi. Market makers help define the depth and liquidity of markets. Makers post a bid and offer price to a given coin and readjust those prices as the market’s transaction activity unfolds. Market makers monitor coin prices in real time and seize upon market trends by establishing positions as marginal buyers and sellers transact. Simply put, when most traders on the market try to sell an asset, market makers would buy it, and when most traders on the market try to buy an asset, market makers would sell it. By doing so, market makers play a critical role in coin prices while preventing unpredictable spikes in price due to poor liquidity.
The bid/offer spreads that market makers enjoy are how they get paid for providing liquidity to a coin. They play an essential role in the market, smoothing out price adjustments and helping ensure an orderly market over time.