Liquidity Provider
A “liquidity provider” is a person or company that participates in a crypto market by giving buyers and sellers access to liquidity.
Liquidity providers are essential in order for markets to run smoothly, including cryptocurrency exchanges. Usually, liquidity providers participate in the market by putting buy and sell orders at various price points. By accepting or offering assets for sale, they hope to close the gap between buyers and sellers. They do this to provide depth to the order book, which enables other market players to execute trades at more advantageous prices and with less slippage.
These companies may generate income in exchange for supplying liquidity in a number of ways, such as by collecting the bid-ask spread or taking advantage of rewards offered by the exchange or platform.