Every founder who launches a token eventually runs into the same practical problem, which is that a token nobody can trade smoothly is a token nobody trusts. Liquidity — the ability to buy or sell an asset without pushing the price around — is what turns a freshly minted token into a real, tradable market, and it sits at the heart of price discovery, investor confidence, and the overall resilience of a market. As WazirX notes, thin liquidity magnifies slippage and makes even fundamentally strong assets harder to trade efficiently, which is why getting this right is one of the highest-leverage decisions a project makes.
The first fork in the road is where to build that liquidity: in a decentralised exchange's liquidity pool, or through professional market making on a centralised exchange. The two are genuinely different disciplines, each with real strengths and real drawbacks, and the right starting point depends on the kind of project you are building. The market itself has grown more hybrid: according to DWF Labs, decentralised exchanges have climbed to over 20 percent of trading volume by the end of 2025 and are still rising in 2026, even as centralised venues continue to host the deepest and most institutional flows. This guide breaks down what market making actually involves, compares the two models point by point, and helps you decide where your token should begin.
The job of a market maker, in plain terms
At its simplest, a market maker is a participant that stands ready to both buy and sell an asset at all times, quoting a price to buy (the bid) and a price to sell (the ask) simultaneously. The small gap between those two prices is the bid-ask spread, and a tighter spread is the clearest sign of a liquid, efficient market. By keeping continuous orders on both sides, a market maker absorbs the natural imbalances between buyers and sellers, smooths out volatility, and lets people enter or exit positions without causing sharp price swings.
In the traditional, centralised model, this is done by professional firms that use their own capital to place those buy and sell orders, earning the spread in exchange for taking on inventory risk, since the positions they hold can move against them when the market shifts. As Chainlink explains, centralised exchanges routinely partner with institutional market makers precisely so there is always enough depth for users to trade without significant price impact. Decentralised exchanges achieve a similar end through a completely different mechanism, which is the natural place to start the comparison.
Starting on a DEX: liquidity pools and the AMM model
Most decentralised exchanges replace the order book entirely with an automated market maker, or AMM. Instead of matching individual buyers and sellers, an AMM relies on liquidity pools, which are smart contracts holding reserves of two tokens. Anyone can become a liquidity provider by depositing a pair of tokens, usually in equal value, into the pool; in return they receive a token representing their share and earn a slice of the fees from every swap that passes through. Prices are set automatically by a mathematical formula, classically the constant product formula written as x multiplied by y equals k, which keeps the pool balanced as people trade against it.
For a token project, this means liquidity can be created permissionlessly and almost instantly. Uniswap pioneered and still leads this model, clearing roughly 73 billion dollars in 30-day volume across some 40 chains, and its newer versions add concentrated liquidity, which lets providers focus their capital within a chosen price range for greater efficiency. There is no gatekeeper and no listing committee; if you can deploy a smart contract, you can open a market.
What DEX liquidity gets right
The decentralised model has a set of advantages that are difficult to replicate anywhere else, and for certain projects they are decisive.
- Permissionless access — any project can seed a pool and open a market without approval, which makes it the fastest possible route to a tradable token.
- Self-custody — funds stay in the user's wallet and in transparent smart contracts rather than with a third-party custodian, so there is no need to trust a company with your assets.
- Composability — on-chain liquidity plugs directly into the wider DeFi ecosystem, so the same tokens can flow into lending, yield, or other protocols in a single transaction.
- Cheaper execution on Layer 2 — as Zipmex notes, the migration of activity to Layer-2 networks has cut swap costs to a few cents, weakening one of the historic arguments against decentralised trading.
- Improving execution quality — newer intent-based designs such as CoW Swap, 1inch Fusion, and UniswapX let professional solvers compete to fill orders, which, according to Status Network, is beginning to approach the execution quality of centralised venues.
The catch: impermanent loss and thin depth
Those advantages come with trade-offs that matter a great deal once a project is trying to support a serious market. The most important is impermanent loss, a risk unique to pooled liquidity that occurs when the prices of the two deposited tokens diverge from their ratio at the time of deposit. Because providers must hold a fixed balance of assets, a significant price move can leave them with less value than if they had simply held the tokens in a wallet, and the loss only becomes permanent if they withdraw while the imbalance persists. On a standard Uniswap pool, liquidity providers earn 0.3 percent of each swap, but that fee income does not always compensate for the impermanent loss on a volatile pair.
Beyond that, AMM pools tend to offer thinner depth for large orders, so a sizeable trade in a modestly funded pool can suffer heavy slippage. Liquidity is also fragmented across many chains and pools rather than concentrated in one place, and on transparent blockchains, trades are exposed to MEV, where bots can front-run or sandwich a transaction. Smart-contract bugs remain a genuine risk to funds, and there is no customer support to reverse a mistake. Crucially, the model is largely passive: a pool follows its formula but does not actively manage quotes to defend a tight spread or steady the price the way a dedicated market maker does, and meaningful depth requires locking up substantial capital.
Order-book market making on centralised exchanges
On a centralised exchange, liquidity works the way it does in traditional finance. A matching engine pairs buyers with sellers on an order book, and to keep that book deep and tight, the exchange and the project rely on professional market-making firms that continuously quote both sides. Rather than depositing into a passive pool, these firms actively manage their quotes in real time, adjusting prices as the market moves, replenishing inventory, and holding spreads narrow even under stress. Modern operations of this kind are highly technical, using low-latency infrastructure and, as DownBeach describes, colocated servers placed close to the exchange's engine to react in microseconds.
Why projects bring in professional market makers
The reason serious projects engage a market maker is straightforward: it produces the kind of liquidity that institutions and active traders actually need. Deep, two-sided order books let large orders fill without major price distortion, spreads stay tight, and prices remain stable through volatile conditions. That depth signals a healthy, credible market, which in turn attracts more participants and supports cleaner price discovery. It is the difference between a token that technically exists on an exchange and one that genuinely trades well there, and it is the layer of liquidity that opens the door to the institutional capital that now makes up a large share of exchange volume.
What it asks of you in return
The centralised route is not free of requirements, and it is fair to be clear about them. It depends on having a listing on an exchange, which is itself a demanding process, and on forming a relationship with a market-making firm under an agreement that typically follows a fee, loan, or profit-share structure. Funds traded on the venue sit with the exchange rather than in self-custody, which introduces counterparty and regulatory considerations that come with trusting a centralised platform, as Greeks.live notes when contrasting the risk profiles of the two models. The upside is that the inventory risk and the day-to-day complexity of quoting are carried by the professional firm rather than by the project itself.
DEX vs CEX market making, side by side
The table below sets the two models against each other across the factors that matter most when you are deciding where to build your token's liquidity. As with any comparison, the right answer depends on weighting these factors for your specific project.
So which should you start with?
The honest answer is that it depends on what kind of project you are and where your users are. If you are building something DeFi-native or on-chain-first, launching on a chain before any centralised listing, then seeding a DEX liquidity pool is usually the natural first step. It is permissionless, immediate, and you can do it yourself, which makes it ideal for getting an early market running and for projects whose entire community already lives on-chain.
If your ambition is broader reach, meaningful trading volume, institutional participation, and the credibility that comes from trading well on major venues, then a centralised exchange listing backed by professional market making is what delivers that. A DEX pool is the easiest place to begin, but it is a starting point rather than a substitute for the deep, actively managed liquidity that a serious market demands. The practical questions that should guide the decision are simple: where does your audience trade, do you have or plan a centralised listing, how much depth do you actually need, and how much capital are you prepared to lock up. The more your answers point toward scale, institutions, and major exchanges, the more the balance tips toward professional order-book market making.
In practice, most projects don't choose just one
It is worth dispelling the idea that this is a strict either-or. In reality, many projects use both models because they serve different stages and different audiences. A common path is to open a DEX pool first for on-chain accessibility, then add professional market making as the token lists on centralised exchanges and the project starts courting larger traders and institutions. The market structure itself is moving in this hybrid direction, and DWF Labs argues that the strongest liquidity providers will increasingly be those able to operate seamlessly across both centralised and decentralised venues. For a founder, the takeaway is not to pick a side permanently, but to match the liquidity model to the project's stage and goals, and to recognise when on-chain pools have taken the token as far as they can.
Why liquidity makes or breaks a launch
Whichever route a project takes, the stakes are high, because liquidity is one of the most common reasons token launches stumble in their first months. A token can have a strong team, sound tokenomics, and real technology and still struggle if its market is thin and erratic, since wide spreads and jumpy prices erode confidence at exactly the moment a new project most needs to build it. A poorly supported launch can trap early holders in positions they cannot exit cleanly, which damages reputation and makes the next stage harder.
This is why the liquidity decision deserves to be made deliberately rather than as an afterthought once the token is already live. Planning where and how a market will be supported, well before the token generation event, is part of what separates launches that hold their footing from those that lose it in the volatile early window. The model you choose, and the quality of the liquidity behind it, is not a technicality; it is part of the foundation a project stands on.
Frequently Asked Questions
What is crypto market making?
Crypto market making is the practice of continuously quoting both a buy price and a sell price for an asset so that other traders can always transact. Market makers keep order books deep and spreads tight, which reduces volatility, supports stable prices, and lets large orders fill without major price impact. They earn the small difference between their bid and ask, known as the spread, in exchange for taking on the risk of holding inventory.
What is the difference between DEX and CEX market making?
DEX market making relies on automated market makers, where users deposit token pairs into a liquidity pool and trades execute against that pool by formula. CEX market making relies on professional firms that actively quote both sides of an order book and manage their prices in real time. The DEX model is permissionless and self-custodial but largely passive, while the CEX model offers deeper, actively managed liquidity but requires an exchange listing and a market-making partner.
What is impermanent loss?
Impermanent loss is a risk specific to providing liquidity in a DEX pool, occurring when the prices of the two deposited tokens diverge from their ratio at the time of deposit. Because liquidity providers must hold a fixed balance of assets, a large price move can leave them with less value than if they had simply held the tokens. The loss is called impermanent because it can reverse if prices return to their original ratio, but it becomes permanent once the liquidity is withdrawn.
Should a new token start on a DEX or a CEX?
It depends on the project. DeFi-native and on-chain-first tokens often start with a DEX pool because it is permissionless and immediate, while projects aiming for broad reach, serious volume, and institutional participation generally need a centralised exchange listing supported by professional market making. Many projects begin on a DEX and add CEX market making as they scale, since the two models suit different stages.
Do I need a market maker for my token?
If your token trades on a centralised exchange and you want it to have deep, stable liquidity, then a professional market maker is effectively essential. Without one, an order book can be thin and volatile, leading to wide spreads and erratic prices that discourage traders. A market maker provides the consistent two-sided quoting that keeps a market healthy and credible, which is particularly important in the fragile period after a launch.
How does order-book market making work?
Order-book market making works by having a firm place continuous buy and sell orders on an exchange's order book and update them in real time as the market moves. The firm uses its own capital, earns the spread between its bid and ask, and manages its inventory and risk dynamically. This active management keeps spreads tight and depth available even during volatile conditions, which is what allows large trades to execute smoothly.
Is providing liquidity to a DEX pool the same as market making?
It is a form of market making, but a passive and automated one. When you supply assets to a DEX liquidity pool, you are providing liquidity that others trade against, which is why the underlying mechanism is called an automated market maker. The key difference from professional order-book market making is that a pool simply follows a pricing formula, whereas a professional market maker actively manages quotes to defend tight spreads and respond to market conditions.
Can a project use both DEX and CEX liquidity?
Yes, and many do. A common approach is to open a DEX liquidity pool early for on-chain accessibility and then engage professional market making once the token lists on centralised exchanges. The two models reach different audiences, with DEX pools serving on-chain DeFi users and CEX market making serving the retail and institutional traders on major venues, so using both can broaden a token's reach.
How much liquidity does a new token need?
There is no single figure, because the right amount depends on the token's target trading volume, the venues it lists on, and the size of orders it needs to support. The practical goal is enough depth on both sides of the market that ordinary trades fill without significant slippage and spreads stay tight. This is exactly the kind of calibration a professional market maker handles, sizing and managing liquidity to match a token's stage and the exchanges it trades on.
What should a founder look for in a market maker?
A founder should look for transparency, a clear track record, and an arrangement that aligns the market maker's incentives with the health of the token's market. Useful signals include real-time reporting and clear visibility into performance, experience on the specific exchanges where the token will trade, a sound approach to risk, and a commitment to operating within compliant frameworks. The right partner is one whose model and expertise match the project's market cap, sector, and stage.
Building Liquidity Where It Counts
Whichever way a project starts, the moment a token lists on a centralised exchange and needs the kind of depth that institutions and active traders rely on, that is the work of professional order-book market making. Motion Trade provides exactly this on the leading centralised exchanges, supplying the consistent two-sided quoting, tight spreads, and order-book depth that turn a new trading pair into a market participants can actually use, for both institutional and retail traders. In a landscape where liquidity is the quality that separates a token which merely exists on an exchange from one that trades well on it, having the right market-making partner is part of the foundation a launch stands on.
If you are preparing a token launch or want to strengthen liquidity on the exchanges where you are already listed, let's talk. Reach out via our website or message us on Telegram.
