Market Manipulation

A Forbes magazine article from June 2018 based on a crypto enthusiast's tweet about the market's deep manipulation. Many crypto trading activities are illegal in conventional exchanges, according to the Twitter account owner. Wash trades, spoofing, and front running are examples of these methods.

Market manipulation is a term that refers to a variety of techniques used to manipulate the market for personal gain. As a result, as a crypto enthusiast, it is important that you gain a better understanding of market manipulation and take steps to defend yourself. Continue reading to learn about the dangers of crypto market manipulation and how to avoid them.

Market Manipulation's Consequences

In crypto markets, the people who start market manipulations are usually the ones who benefit the most at the expense of other small traders. As a result, market abuse is a serious problem for crypto exchanges and the people who trade the coins. These criminals devise deception schemes on telegram or other social media sites to entice people looking for quick cash.

New crypto traders looking for quick profits are often the ones who lose the most money in crypto fraud schemes. They're interested in making massive profits with little or no effort.

The crypto exchanges are still the major losers of these schemes. The exchanges are often chastised, with critics accusing them of failing to take adequate steps to combat manipulation. These platforms would lose not only their titles, but also the confidence of traders.

Such fraud schemes have cost the crypto industry a lot of money. Financial analysts, traders, and institutions have all lost faith in a market that is vulnerable to cyber-attacks. Some media outlets may choose to exploit these manipulations by demonising the crypto industry, which is unregulated.

The criticism impact has resulted in a slowing of the crypto industry's adoption as well as a ban in some countries. The Bangladesh central bank, for example, stated that one of the reasons for banning bitcoins is that it causes financial loss to its people. The publicised market manipulation schemes and hackings in the crypto environment were without a doubt the reasons for the ban.

Market Manipulation: How to Recognize and Avoid It

To learn the best way to defend yourself from market manipulation, you must first understand the various tactics used by criminals to manipulate markets. Here are a few deception techniques as well as how to easily protect yourself.

Wash trade

Whale traders use this strategy to generate high demand for assets or high trading volumes. Wash trading refers to transactions in which no shares are actually exchanged. The concept of wash trading is to create deceptive market sales. When investors see these fake transactions, they can get the idea that there is a lot of trading going on.

False transactions generate fictitious liquidity, attracting new customers to the exchange. In the conventional world, exchange volumes are ideal for currency, but in the crypto world, things are different. Since they are in desperate need of investors, small exchanges are particularly vulnerable to exploitation.

External forces believe that the best way to deal with this threat is to impose certain regulations. We don't know if this is possible in the crypto world, but as an investor, you should take precautions. Avoiding very high trades, particularly on new exchanges, is the most effective way to protect yourself. Concentrate on crypto exchanges with longer price swings to avoid the pain of losing money on quick transactions.

Hidden orders

Orders that aren't in the order book are known as hidden orders. A trader uses this tactic to manipulate the market by placing large orders that he or she has no intention of fulfilling. Hidden orders often reflect massive flows, but they are normally cancelled once the demand reaches the desired amounts.

The easiest way to avoid being duped by hidden orders is to pay less attention to the order book. A proper mitigation technique is simply testing the business dynamics of the particular exchange and their trading history. Hidden order manipulation is a specialty of liquidity suppliers and algorithmic traders. It would be beneficial if you were extremely cautious when trading cryptos on exchanges.

Forced liquidation

When an individual's assets are sold because they are unable to meet the conditions, this is known as forced liquidation. Brokerage firms and major market movers could profit from placing themselves in a liquidating role.

Small traders lose money as they are forced to liquidate, while whales gain value. It's difficult, if not impossible, to tell if the tactic is being used by traders or market whales.

Slippage is a strategy for counteracting all forms of market abuse. It entails calculating the value of an asset through various exchanges. Take note of the rate of price decline in each asset.

High slippages indicate major price losses and chaotic order books on exchanges that manipulate their markets. Since small sale orders can manipulate order books and coin rates, the high slippages will show that their volumes are fake.

Final thoughts

Small crypto traders have suffered significant losses as a result of market manipulation, while whales have made extraordinary profits. However, determining the necessary regulatory steps to bring the crypto world into order is difficult. It's best if you were cautious about all of your cryptocurrency transactions and exchanges.

You may also use sites that are not subject to market manipulation. Binance, CoinBase, BitFinex, Liquid, and BitStamp are only a few of the sites that haven't had any issues with fraud since their inception. While regulations are needed to protect the crypto space from market manipulation, traders should exercise caution to avoid losing money.