Futures spread trading occurs when traders simultaneously open two futures contracts in opposing directions to capitalize on the price difference between them.

If you’ve traded perpetual futures (perps) before, you’ll know that they often come with plenty of highs and lows. With futures spread trading, you can mitigate some of these risks by focusing on the relative price movements between two contracts, rather than the absolute price changes. This sophisticated strategy allows you to profit from the spread, while minimizing exposure to overall market volatility — which is particularly beneficial in highly volatile markets like crypto.

In this article, we’ll learn about futures spread trading, how it works in practice and why traders might choose this approach over outright futures trading. We’ll also delve into the key advantages and potential drawbacks to consider before you get started. By the end of this article, you’ll have a better understanding of whether futures spread trading is a suitable strategy for your trading goals and risk tolerance.

Futures spread trading is a sophisticated strategy in which traders simultaneously open two 

 in opposing directions in order to capitalize on the price difference between them, known as the spread. 

Unlike traditional trading methods that focus on the absolute price movements of buying low and selling high, spread trading emphasizes the relative price relationship between two futures contracts.

Futures spread trading in the crypto market

In the crypto market, spread trading often involves both expiring futures and 

, which are futures contracts without an expiration date. Perpetual futures allow traders to maintain positions indefinitely, making them popular for spread trading strategies. The primary goal for crypto futures spread traders is to profit from changes in the spread, while minimizing exposure to overall market volatility. By focusing on the relative price movements between contracts, traders can reduce their risk and capitalize on market inefficiencies, even in highly volatile environments like crypto markets.

While the execution of a futures spread trade may seem daunting, its mechanics will feel more manageable once you’re familiar with the moving parts of each trade. From planning out entries to deciding on potential cross-asset spreads, we’ll share with you all you need to know when it comes to spread trading for crypto futures.

Futures spread trading offers several benefits that make it an attractive strategy for traders in the crypto market. Following are some of the key advantages worth considering

Due to its market neutrality, futures spread trading provides a reduced 

, making it particularly beneficial in highly volatile markets such as crypto. By focusing on the price differences between two contracts, traders can enjoy gains from the spread while reducing their exposure to market-wide volatility. 

For example, a crypto trader buying a March 2025 Bitcoin futures contract and selling a June 2025 Bitcoin futures contract can profit from the spread, regardless of whether Bitcoin's price surges or plummets. Since both contracts are likely to be affected similarly by overall market movements, the trader can focus on the relative performance between them, minimizing exposure to broader market volatility.

 requirements for spread trades, due to their reduced risk profile. This allows traders to control larger positions with less capital, enhancing their potential gains and providing additional liquidity. For instance, using a cross-margin account mode, a trader can execute a spread trade with even less upfront margin as compared to trading outright futures contracts. This capital efficiency enables traders to maximize their trading capacity without tying up excessive capital in margin requirements.

Traders can diversify their portfolios by engaging in cross-asset spreads based on their existing inclinations. This strategy allows traders to profit from the relative performance of different crypto projects. For example, trading Ether futures against Bitcoin futures, or comparing crypto ecosystems through spread trades, can provide opportunities to capitalize on differences in performance between assets. This diversification helps spread risk across multiple assets, making the trading strategy more resilient to market fluctuations.

4. Protection from external market shocks

Spread trading offers added insulation from external fundamental factors, such as regulatory changes or economic announcements that can significantly impact specific assets or projects in the crypto space. For instance, if a regulatory announcement causes Bitcoin's price to drop, the impact on both the long and short legs of a Bitcoin futures spread would be similar, minimizing the overall effect on the trade. This insulation helps traders maintain a more stable trading environment despite external market influences.

Spread trading often involves identifying and exploiting 

 opportunities arising from inefficiencies in market pricing. This can lead to gains with low risk. For example, if a spread trader notices a price discrepancy between Bitcoin futures contracts on different exchanges, they can profit by buying the cheaper contract and selling the more expensive one. This strategy allows traders to capitalize on market inefficiencies without taking on additional exposure or market risk, thus providing a low-risk opportunity for profit.

While futures spread trading offers benefits, such as reduced exposure to market volatility and lower margin requirements, it also involves unique risks that traders must understand and manage. Following are the key risks associated with futures spread trading in the crypto market.

Execution risk is a significant concern in futures spread trading, particularly in fast-moving crypto markets. This risk manifests as 

, whereby the actual execution price differs from the expected price, often due to rapid price movements or low liquidity. For instance, a trader attempting to execute a 

 by buying a March 2025 Bitcoin futures contract and selling a June 2025 contract might face slippage. If the price of the June contract moves unfavorably during execution, the trader ends up with a larger spread than anticipated, leading to potential losses. This scenario highlights the importance of monitoring market conditions closely and using tools that minimize execution risks.

Market risk is another critical factor in futures spread trading. Although spread trading focuses on relative price movements, adverse changes in either contract can still result in losses. This risk is heightened in volatile markets such as crypto. For example, a trader executing a cross-asset spread by buying Ether futures and selling Bitcoin futures is exposed to market risk. If Ether's price drops more than Bitcoin's, the spread widens unfavorably, leading to losses. This scenario underscores the need for traders to closely monitor market dynamics and adjust their strategies accordingly in order to mitigate potential losses.

Leverage risk is inherent in crypto futures trading, as high 

 can amplify both profits and losses. If the market moves against a trader's position, they may face margin calls, potentially leading to forced 

 at unfavorable prices. For instance, a trader using leverage to execute a large calendar spread in Bitcoin futures may face significant losses if the spread moves against them. They might be required to deposit additional margin or face liquidation, resulting in substantial financial losses. This highlights the importance of managing leverage carefully and setting appropriate 

Liquidity risk is a major concern in futures spread trading, especially in crypto markets, where liquidity can vary significantly across different assets and exchanges. Trading illiquid contracts can lead to wider bid-ask spreads and difficulty in executing trades at desired prices. For example, a trader attempting to close a spread position in a less liquid altcoin futures market may face challenges selling at a favorable price due to low liquidity. This can lead to increased losses, as the trader may have to accept a lower price or wait for better market conditions, which might not materialize. Therefore, it's crucial for traders to assess liquidity before entering a trade, and to plan accordingly.

Counterparty risk is another significant concern for traders, as they’re exposed to the risk of exchange failures or counterparty defaults. If the exchange or counterparty fails to fulfill their obligations, traders may incur losses. For instance, a trader holding a spread position on a smaller, unregulated exchange faces the risk of operational issues or insolvency. If the exchange experiences such problems, the trader may not be able to close their position or recover their funds, leading to substantial financial losses. This underscores the importance of choosing reputable exchanges and diversifying trading activities across multiple platforms.

Futures spread trading can be a valuable strategy for experienced traders who understand its complexities and can manage its risks effectively. However, it may be more challenging for beginning traders, due to the need for a solid understanding of futures markets and 

. Beginners might consider starting with simpler strategies, and gradually moving to spread trading as they gain more experience and confidence in their trading abilities.

As for experienced crypto traders, futures spread trading can certainly be something to explore. This is largely because veteran traders will be able to keep to their planned risk management levels, and take advantage of the strategic flexibility that typically comes with executing futures spread trades. Armed with the necessary market knowledge, experienced crypto traders can even plan and execute cross-asset spreads that make such trades even more lucrative.

As the crypto market continues to evolve, mastering futures spread trading can effectively provide crypto traders with a competitive edge, offering reduced risk profiles, capital efficiency and opportunities to diversify. By staying informed about market conditions and leveraging the capabilities of platforms such as Bybit, traders can execute spread trades effectively and achieve greater success in the dynamic world of crypto futures trading.

Intermediate

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Futures spread trading: Navigating price discrepancies for profit

Vitalik Buterin has outlined a nine-step roadmap to improve privacy on Ethereum, aiming to enhance user privacy with minimal changes to the network’s consensus.

The S&P 500 rose 5.7% last week after a tariff delay eased trade war fears; investors now await major earnings reports. Gold hit a record $3,200 amid trade tensions, a weaker dollar, and rising Fed rate cut expectations, with strong support from ETF inflows and central bank buying. CoinDesk Indices, which tracks the broader crypto market, dropped 0.31% in the past 24 hours, Bitcoin and Ether rose 1.22% and 2.00%, respectively. Trade these markets and more with up to 500x leverage on Bybit MT5 using this 

Today's top performer is BABY, up 25%, following the launch of Babylon's L1 mainnet and its partnership with Axelar for interoperability.

Babylon (BABY), launched on August 22, 2024, is a Bitcoin staking platform that enables users to earn income by temporarily locking their BTC tokens. Its trustless design differentiates it from other platforms by reducing the risk of malicious activity. Babylon 

 its Layer 1 mainnet, Genesis, and native token, BABY, on April 10, alongside a partnership with Axelar for blockchain interoperability. With over $4 billion in Bitcoin staked, Babylon allows Bitcoin holders to stake directly, earning rewards in BABY, which also serves for gas and governance. The launch marks Bitcoin’s entry into the staking market.

Check out the latest prices, charts, and data of 

 to improve privacy on Ethereum, aiming to enhance user privacy with minimal changes to the network’s consensus. Key steps include integrating privacy tools like Privacy Pools into wallets, making private sends the default, and adopting a "one address per application" standard. Buterin also proposed using trusted execution environments (TEEs) for short-term privacy solutions, transitioning to private information retrieval (PIR) for stronger privacy. Additional suggestions include supporting privacy protocols and allowing multiple privacy transactions to share a single proof. The goal is to ensure stronger privacy protections against RPC node adversaries.

Between April 7–11, 2025, Bitcoin spot ETFs recorded a total net outflow of $707.9 million, driven by $160.9 million from GBTC and $547 million from non-GBTC products, with the largest outflow occurring on April 8. Despite the weekly dip, total flows since inception remain positive at $35.5 billion, as $58.2 billion has flowed into non-GBTC ETFs, outweighing the $22.8 billion in cumulative GBTC outflows.

, a new Layer 1 blockchain backed by Arweave and Framework Ventures, has launched its testnet and arcade portal. Users can earn test IRYS tokens by playing games like Snake and Frogger, potentially qualifying for a future airdrop. Daily faucet claims and active participation may increase rewards.

Beginner

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Vitalik Buterin outlines nine-step plan to enhance privacy on Ethereum

Explore Siren (SIREN), the AI-powered crypto platform blending meme culture with smart investing tools, trading insights and on-chain automation.

As artificial intelligence (AI) continues to shift narratives in most sectors, the 

 space hasn’t been left behind. There’s been an influx of projects leveraging this technology, especially those incorporating 

 into their operations. According to our 

, the market capitalization for AI agents grew to over $15.5 billion by the end of Q4 2024.

One such project that’s leveraging blockchain technology and AI to add value for its investors is Siren (SIREN). The platform cleverly combines AI with the viral nature of meme culture to provide efficiency to crypto users.

 (SIREN)’s blockchain/AI platform provides users with access to smart investing and automated trading as they explore the 

. The project attracts web3 users by merging the appeal of meme culture with AI via AI agents.

Siren’s AI agents are based on the legendary sirens in Greek mythology, who enchant beings with celestial songs. As such, Siren’s AI agents are designed to draw users into the fascinating world of crypto.

Siren was launched by Four.meme, a project by 

 (formerly BinaryX) that provides a platform on which people can create tokens with zero fees. Just as 

 promotes Solana’s blockchain, Four.meme has been driving the meme culture narrative on 

Since its launch, Siren has been stirring the tides of crypto space. On Mar 20, 2025, SIREN was listed by 

 and BNB CARD. Upon its listing on Bitget on Mar 21, 2025, SIREN experienced a brief surge to almost $0.10 on Mar 22, which boosted its accessibility and liquidity.

Siren’s advanced AI tools enhance the user experience with the following key features.

Siren’s smart assistant, SIREN AI, serves as a personal aide, capable of managing schedules, setting reminders and delivering real-time information tailored to an individual’s investment preferences. By comprehending user habits and needs, it offers proactive suggestions to aid you in your investment decisions.

Represented as two alluring siren sisters, SIREN AI has two distinct functions. Rationality is the logic-driven sister who provides data-driven investment advice, while Imagination brings out the creative side of SIREN AI’s ability to spot new investment opportunities.

Complementing the SIREN AI smart assistant is the AI trading agent, a tool designed for the financial sector. It analyzes market trends and executes trades on behalf of users, utilizing advanced algorithms to process vast amounts of financial data. The agent then uses the data provided to make informed decisions, aiming to optimize investment strategies and potentially enhance returns.​ With multichain support and AI-powered analytics, the trading agent aims to offer advanced market intelligence across diverse ecosystems.

Apart from the AI assistant and trading agent, Siren AI also envisions tying the DeFi system together and leveraging AI agents for participation in DAO governance and optimization of new web3 functions.

Together, these three functions create a holistic ecosystem to revolutionize your DeFi experience. By integrating these capabilities, SIREN AI offers a comprehensive solution that empowers users with intuitive support, real-time insights and dynamic participation in the DeFi world.

 Perpetual contract in Bybit’s Innovation Zone with leverage of up to 25x. The Innovation Zone lists projects handpicked by the Bybit team, giving you early access to potentially high-return investments (at a higher fee and associated risk).

As of Apr 14, 2025, SIREN was trading at $0.0495, a 53.6% drop from its ATH of $0.11 on Feb 19, 2025, and a 89.3% increase from its ATL of $0.026 on Mar 11, 2025. As of Apr 14, 2025, SIREN’s market cap stands at $36.66 million, with a daily trading volume of $13.46 million.

Crypto prediction experts are pretty bullish on SIREN’s price. According to DigitalCoinPrice, 

 a maximum price of $0.18 in 2027 and increase to $0.27 by 2030. Meanwhile, CoinCodex 

 that SIREN could trade at $0.06 in 2027 and a maximum of $0.22 in 2030.

While these prices may seem bullish, they aren’t a guarantee of SIREN's future price. We highly recommend you 

 before investing in SIREN or any other meme coins in the crypto market.

Siren (SIREN) represents the cutting edge of artificial intelligence evolving to meet modern needs, both serious and playful. Its functions offer users a unified, intelligent AI-driven DeFi experience, and Siren delivers an adaptive and proactive solution tailored to modern investors.

But Siren goes beyond utility — it embraces the spirit of meme culture and the internet-native generation by giving users relatable, personality-driven AI agents. These agents don’t just serve — they entertain, engage and evolve with you. As AI continues to blend with digital culture and web3, Siren is leading the charge, creating a future in which technology is smart and social. 

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Siren (SIREN): Bewitching the crypto realm with AI sorcery

Our monthly report delves into insights from options volatility to inspire your next crypto move.

: The cryptocurrency market is highly reactive to macroeconomic events, with volatility responding sharply to geopolitical developments, particularly US tariff policies.

: Frequent inversions in the term structure of implied volatility suggest that traders are adjusting their risk perceptions based on immediate market conditions, rather than anticipated events.

: A notable shift toward bearish sentiment is evident, as indicated by a preference for out-of-the-money puts that reflects increased demand among investors for downside protection.

: The market remains cautious, with elevated levels of short-tenor implied volatility indicating expectations of potential future disruptions despite periods of calm.

The cryptocurrency market exhibited pronounced reactive volatility in March 2025, driven primarily by macroeconomic factors, particularly US tariff policies. Implied volatility spiked sharply in response to significant price movements, indicating that market participants were reacting more to immediate news, rather than positioning themselves ahead of expected events. The volatility surged in the wake of US president Donald Trump's tariff announcements, which created a pattern of rapid price fluctuations. This dynamic led to a notable peak in volatility that subsequently collapsed during quieter periods, revealing a market characterized by uncertainty and sensitivity to geopolitical developments.

During this time, Bitcoin's realized volatility has reached unprecedented levels, matching peaks not seen since the previous year’s significant market disruptions. Despite episodes of low realized volatility, short-term implied volatility consistently remained elevated, suggesting that traders were preparing for potential future disruptions, even when immediate volatility appeared subdued. This persistent expectation of volatility reflects an underlying apprehension in the market as participants brace for the potential impacts of ongoing geopolitical tensions and macroeconomic instability.

The analysis of the term structure of implied volatility reveals frequent inversions, a phenomenon whereby short-dated options exhibit higher implied volatility as compared to their longer-dated counterparts. This inversion typically indicates heightened expectations of imminent market events, or a surge in demand for short-dated options in response to sharp market movements. In March 2025, the market experienced multiple instances of such inversions, largely driven by the volatile nature of the underlying asset prices.

These inversions were particularly notable since they occurred in response to actual market conditions, rather than anticipated future events. For instance, the buildup of volatility surrounding the upcoming tariff announcements didn’t reflect the expected risk premiums that had characterized other significant events, such as political elections. Historical comparisons show that previous inversions were often resolved rapidly after the events occurred, unlike the gradual shifts observed in March, suggesting a potential mispricing of risk as market participants grappled with uncertainty in the geopolitical landscape.

The fluctuations in realized volatility during this period oscillated between extremes, highlighting the currently unpredictable nature of market conditions. Sustained high levels of short-tenor implied volatility indicated a reluctance among traders to engage in lower volatility assumptions, reflecting ongoing concerns about potential market disruptions.

Data suggests bears taking the upper hand

A significant shift in market sentiment was evident via the analysis of volatility smiles, particularly the increasing skew toward out-of-the-money puts. This change indicated a growing appetite for downside protection among investors, marking a departure from previous bullish sentiment observed in the market. The shift was particularly pronounced during March, as longer-dated volatility smiles leaned toward OTM puts for the first time since the November 2024 US elections.

Increased demand for put options was driven by a shift in market dynamics following the reversal of a prior bullish rally. As tariff tensions escalated, the market exhibited a clear preference for downside protection, leading to a reevaluation of risk. The analysis reveals that the relative demand for call options hasn’t declined sharply, but instead has gradually decreased, indicating a more cautious outlook among market participants.

This evolving landscape of volatility suggests that the cryptocurrency market is navigating a period of heightened uncertainty shaped by rapid developments in global trade and economic policy. The persistent inversion of the term structure and the pronounced bearish sentiment signal a market preparing for potential volatility spikes. As geopolitical tensions continue to influence market dynamics, the demand for protective options reflects a broader sentiment of caution among investors, underscoring the complexities of navigating the current environment.

Advanced

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Bybit X Block Scholes options volatility report (March 2025): Huge swing leads to frequent inversions; data suggests traders remain cautious

Bybit Learn

DeFi

A liquidity provider (LP) is an independent entity or individual who holds a pool of liquid assets. Learn more about how it works in this article.

During the average crypto trade, a lot goes on behind the scenes. The exchange you work with may enlist help from brokers, liquidity providers and other third-party assistants. Understanding how these services work can create some unique investment opportunities for you. In this guide, you'll learn all about liquidity providers. Not only can you discover how liquidity providers affect your trades, but also how to become a liquidity provider and start earning extra money.

A liquidity provider (LP) is an independent entity or individual who holds a pool of liquid assets. The liquidity provider functions as a middleman who supplies exchanges with the crypto they need to fulfill an order.

Liquidity providers are used in stock markets, foreign exchanges, crypto markets and other institutions that trade assets. They come in many different forms. An LP can be a market maker, investment bank, trading firm, other financial group or an individual. In many modern crypto communities, a liquidity provider is a decentralized autonomous organization (

) that pools funds from multiple community members.

How Do Crypto Liquidity Providers Help Generate Liquidity?

To understand what liquidity providers actually do, it's necessary to take a look at how the average trade works. Consider a case where a buyer puts in an order for a specific amount of crypto. Without a liquidity provider, an exchange would have to browse around until they find a seller who’s offering that amount of liquid crypto. Depending upon the coin, it could be tricky to discover someone offering the right crypto at a fair market price. This is where liquidity providers are useful.

When an exchange is working with a liquidity provider, the provider automatically supplies any order. A buyer places the order, and then the exchange takes the precise amount of ordered tokens from the LP and gives it to the buyer. Then, the next time someone sells the same type of token, the exchange will collect those digital assets and deposit them back with the liquidity provider.

Essentially, the overall amount of tokens the liquidity provider owns remains the same in the long run. However, the individual tokens will be swapped out and replaced with others, and the value may temporarily fluctuate as exchanges remove and deposit tokens. To help regulate this system, some liquidity networks may give these individuals 

, which act as receipts for their initial investments.

Why do individuals choose to become liquidity providers? There are several perks.

The main reason so many people are interested in providing liquidity is for 

. To incentivize liquidity providers, exchanges offer them a portion of the fees each trader makes. Depending upon the type of coin and the exchange you work with, you can earn between 0.05% to 1% of the asset value per each trade for which you supply liquidity as an LP. Thus, if you plan on holding your tokens for a while, you can put them to use and earn extra income, in addition to the money you may make if your tokens increase in value over time.

Being a liquidity provider also reduces your overall risk. When you provide liquidity, you don't have to put a lot of money into betting on the market. Unlike purchasing 

, an unexpected market movement can't cost you thousands. As long as people are trading, you're earning money — and you get to take back all of your original crypto assets at the end.

Being a liquidity provider is more than just a chance to earn money. It allows you to get more involved in the trading process. As a liquidity provider, you can build a positive reputation and help to prevent illiquid markets, so more opportunities open to you. You can potentially meet new business partners through networking, and building your reputation can also allow you to seek more lucrative liquidity-providing contracts.

Liquidity providing can certainly be rewarding, but it's not going to work perfectly for everyone. Here are a few potential risks to be aware of.

 (IL) is the leading danger when working as a liquidity provider. It occurs due to constantly fluctuating market prices, and can happen whenever a liquidity provider is swapping two types of crypto with different prices. If the value of one crypto falls in relation to the other, the liquidity provider may notice a decline in their overall balance of funds when they exchange their LP tokens for actual funds. 

Whether or not you encounter impermanent loss tends to depend upon the coins you offer and the organizations you work with. On certain sites with unfavorable rules for liquidity providers,

Like any other financial arrangement, the safety of being a liquidity provider depends upon the security of the contracts you use. Liquidity providers rely on 

 to ensure they get paid the correct fees, and they get their money back at the end of the experience. If you end up working with an unreliable system and its smart contracts get hacked, you could lose your money and/or compromise your privacy.

Front-running occurs when traders pay extra fees to move their transactions to the front of the line. By getting their transactions processed before those of competitors, traders can take advantage of minor changes in the market and make more money. Certain types of front-running can also harm LPs by keeping them from getting a fair fee for their services.

Even if you have no interest in becoming a crypto liquidity provider yourself, it can still be quite useful to work with LPs because of the benefits they provide for all market participants.

Liquidity providers help to keep pricing somewhat consistent. Without them, a single large purchase or sale can drastically affect the market. However, exchanges can use multiple LPs to fulfill these orders without directly affecting 

The algorithms used by the average automated market maker also help to regulate markets by ensuring there’s a consistent number of tokens in liquidity pools. Crypto market prices still go up and down, but in a liquid market, they don't swing around as wildly or experience sudden changes due to a single purchase.

Market spread refers to the discrepancy between the price at which a seller will sell and the price at which a buyer will buy. While liquidity providers supply assets to the pool, it’s the exchange or the AMM that utilizes these assets to provide trading quotes and set prices. As liquidity is added to the pool, it helps reduce the spread by ensuring a more consistent and stable price between buying and selling. 

Not only does a smaller spread stabilize the market and prevent volatility, but it also makes things a lot easier for market participants who like working with options. When market spreads are smaller, it's much more affordable to work with pairs of options.

Crypto liquidity providers ensure that trading never has to stall due to an illiquid market. When investors can buy and sell on demand, they trade more frequently. Furthermore, increased stabilization and market reliability help to reassure people who otherwise may become frustrated by the trading process. All of these factors combine to create higher trading volume, which in turn provides more investment opportunities.

Liquidity providers are useful, so most modern exchanges work with them. However, there are a few potential downsides that accompany the use of LPs.

 can occur whenever the actual price of an executed trade is different from the price expected. It usually happens when markets are so volatile that orders change in the brief moment between a trader placing the order and an exchange fulfilling it. Since crypto liquidity pools reduce volatility, a liquid market usually has less slippage. However, if the liquidity pool isn't deep enough, slippage still may occur. Trying to rely on liquidity pools as a guarantee against slippage is inadvisable, and can lead to unwelcome surprises.

Liquidity providers offer their services in exchange for money, which results in higher fees for traders. Every time you conduct a trade that goes through an LP, they need to be compensated. Most exchanges pass this fee on to the consumer, so you can expect to pay more when you trade through a platform that uses liquidity providers.

A market maker is a type of trading intermediary, typically a member of a bank or high-frequency trading firm, who uses their own account to buy and sell crypto for the sole purpose of adding liquidity to the market. Market makers usually work alongside brokers or exchanges to help ensure that customers can fulfill their trades, regardless of market liquidity. They essentially "make" the market by working to reduce market spread, stabilize the market and facilitate trades. 

In the modern crypto world, many market makers are actually bots. Called automated market makers (

), these types of systems run on software designed to maintain the exchange.

Technically speaking, a market maker can be a sort of liquidity provider. However, it's only one specific type of liquidity provider, while the overall category of LPs can include many other types of entities or organizations. 

The goal of a market maker also tends to be different from that of the traditional crypto liquidity provider. Market makers work on keeping a specific exchange operational and competitive, while the goal of most liquidity providers is simply to earn money by facilitating trades.

Becoming a liquidity provider is simpler than you might think, especially with the multitude of platforms and services available. Here’s a step-by-step guide to becoming a crypto liquidity provider:

: Before you become a liquidity provider, you need to decide on a platform. Each one has its own fee structure, supported asset and community. Popular 

 are known for their simplicity and wide range of supported tokens, while centralized platforms like Bybit are recognized for their security and liquidity mining features.

: Most platforms require you to deposit an equal value of two tokens to provide liquidity. For instance, if you're providing liquidity for an ETH/USDT pair, you'll need to deposit both ETH and USDT.

For decentralized exchanges, you'll typically connect a digital wallet like 

. For centralized exchanges, you simply deposit your crypto directly into your account on the platform.

 to the liquidity pool of your choice. This often involves interacting with a smart contract that locks up your funds and issues you LP tokens in return.

 in the pair for which you're providing liquidity, you'll start earning a portion of the trading fees. These fees are typically added to the pool, increasing your share.

Regularly check on your investment. Ensure you're aware of any potential impermanent loss and keep track of the fees you're earning.

If you’re looking for a fuss-free way to 

, which is designed to reward users for providing liquidity. Here’s how it works:

: Access Bybit's Liquidity Mining and choose the crypto pairs you wish to provide liquidity for.

Just as with other platforms, you deposit your tokens, which will be used to facilitate trades.

Bybit’s Liquidity Mining rewards you with an APR of up to 35.1%. 

If you like holding crypto for extended periods of time to earn passive income, being a crypto liquidity provider can be a smart move. It's a great way to make money off of your crypto, while also helping crypto exchanges to function properly. Thanks to a myriad of intriguing web3 projects, it's also very easy to become a crypto liquidity provider. For instance, you can join a 

, and you don't even need large sums of crypto assets before becoming an LP.

Keep in mind that the specific organization you work with can make a huge difference. Not only do you get different fees through certain liquidity pools, but you also encounter different regulations. For example, some companies may use special algorithms to help manage digital assets and prevent impermanent loss. Choosing the right liquidity pool for you can result in a more profitable experience.

Crypto liquidity providers are an often overlooked but essential part of the crypto market. By providing market liquidity, they help to reduce volatility, speed up trades and increase trading volume. Not only do they provide valuable services, but crypto liquidity providers also get to earn passive income. If you're interested in becoming a liquidity provider, check out one of the many crypto liquidity pool options available.

What Does a Liquidity Provider Do in Crypto?

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