Trader vs. Market Maker behaviour during crypto crashes

📍 For traders, crypto crash is a test of their nervous system. While for a market maker - it's just a test of their maths.

The truth is, market makers don't need to predict the direction of the asset's price. For example, when ETH's price dropped 12% last weekend, they weren't guessing the bottom. They were casually capturing the spread and earning rebates from the massive volumes.

How it works:

• Rebates vs fees
  Retail traders pay taker fees to exit in panic.
  Market makers get paid (maker rebates) every time their limit orders are filled.

• Volume as a hedge
  Crashes create fear, fear creates turnover. That turnover generates enough fee + spread income to compensate for adverse price moves.

• Execution gap
  A regular trader loses on slippage in a thinning order book.
  A market maker monetizes that exact gap.

That’s why the same -12% move can mean a -15% hit for one participant, and only a -1.5% drawdown for another.

✅ Tyler McKnight broke down the exact math behind this - spreads, rebates, and why volatility is often an ally for market makers, not a threat.