What is Market Manipulation in Cryptocurrency?
Market manipulation is an attempt to artificially manipulate behaviour and influence the price of an asset. It involves either a single individual or a group to create confusion in this market, to get profit at the end of it. For example, the way pump and dump involve a person who pumps up the price of a stock with any fake news and another and so on and reaps the profits at the peak. In 2018, it was determined by the DOJ (the US Department of Justice) that there had been some manipulation of price spoofing with the bitcoin network when it launched an investigation. Read more about three-quarters of bitcoin investors have lost money, if that interests you.
The crypto market is market that is increasingly geared towards the youth, which simply means that there are bad actors who try to find some way to take advantage of its lack of regulation. This goes to no avail for market manipulation, which can create more losses than gains for the participants. Although there are many such cases which are illegal, manipulation will not be easy for the authorities and regulators. Today through this article, we will try to learn about some of the basics related to manipulation in the crypto market as well as identify market manipulation strategies as well as how you can combat them.
How is market manipulation affecting the crypto market?
Market manipulation is one of the main reasons for increasing the volatility of crypto, it can be both unsafe and chaotic for all those new investors. If you see market manipulation going on, then at that point governments and regulators continue to investigate the nascent sector. While certain coins have very small volumes that make them even easier to manipulate, the downsides seen after large spikes are common, especially on all crypto exchanges that have small coins. It is not necessary to buy or sell whale assets. Maybe they send you cryptic tweets and take Joe’s wealth to the top or maybe they can even worse fall. If you are also looking to protect crypto holdings from market manipulation, then first try to learn about the strategies that you can add to your trading toolkit.
Common Market Manipulation Strategies
- Whale Wall Spoofing
Spoofing has been used with bitcoin since its inception, a common tactic seen on less-regulated exchanges. This is a strategy that involves placing large orders into the whale’s order book to create a fake sell or buy wall, also known as spoofing. For example, if it creates a bearish sentiment or is looking to reduce the price, investors associated with whales may panic and place an order to sell at that time. can. After the sale closes, the whale can help clear the sell order and proceed to buy it at a discounted price.
- Pump and Dump
The crypto market is very risky for you but there is only one common crime in this and that is pump and dump. If you want to increase the coin value artificially, then there is a group of people who have been involved in starting the work. Pump and dump targets only coin with a low market capitalization that is only seen on a limited number of exchanges. The coin can be quickly bought by the public after it is noticed by both traders and investors, and then it will be dumped. Recently, there have been some social media communities like Discord, Telegram, and Reddit that have made pump and dump more accessible.
- Wash Trading
Wash trading and whale wall are considered similar to spoofing mainly because they both provide misleading information to the market. It is a strategy involving individuals or groups of individuals and increasingly buying and selling digital currencies to artificially inflate volumes further. The increased activity of the asset is attracting investors and traders associated with it, and at the same time, it is distorting the price further.