Market Maker
A firm or program that continuously offers to both purchase and sell an asset, earning the spread for providing that service.
A market maker profits from the spread and from rebates, while managing the inventory it accumulates by hedging on other venues or in derivatives. Token issuers often sign agreements with market-making firms, sometimes paid in the token itself or through loan-and-option structures, which is a practice with no close parallel in listed equities. Unlike a designated market maker on a regulated stock exchange, a crypto market maker usually has no regulatory obligation to keep quoting, so quotes can be withdrawn during stress precisely when they are most needed. The automated market maker is a software analogue that quotes from a formula rather than from a view on inventory.
In practice
During sharp moves, spreads widen across venues as quoting firms reduce size to limit the inventory they must hedge.
The common misunderstanding
Market makers do not set an asset's fair value; they quote around where they believe they can offload inventory and manage risk.