> Algorithmic traders, yes. Market makers absolutely not. MMs want to be there as much as possible in liquidation cascades, because bid/ask spreads are huge. MMs effectly print riskless money in these situations (which is why you see Alameda and DRW issue so much USDT in these events).
This is a deep misunderstanding of market structure. Market makers are algorithmic traders. In times of price stability they benefit from capturing the spread many times. But it is not risk free: they lose money when offering liquidity to "informed trades" (those followed by a price move) because they are holding the wrong position through the price move. For that reason, every market makers implements fail-safes that stop offering liquidity when they are not confident they will be able to clear their position at a break even price.
This is a deep misunderstanding of market structure. Market makers are algorithmic traders. In times of price stability they benefit from capturing the spread many times. But it is not risk free: they lose money when offering liquidity to "informed trades" (those followed by a price move) because they are holding the wrong position through the price move. For that reason, every market makers implements fail-safes that stop offering liquidity when they are not confident they will be able to clear their position at a break even price.