It has been widely accepted that manipulation of crypto assets, particularly within exchanges, where the bulk of trades actually happen, occurs. In order to improve their positions in CoinMarketCap, 88 percent of the Top twenty-five cryptocurrency exchanges, according to recent research, manipulate their trade volume. Several consumers, traders, and speculators have been drawn by the rise in the value of cryptocurrencies. Yet, there have also been complaints about possible manipulations perpetrated by certain of these players in the cryptocurrency market. More for crypto trading and investment log onto Immediate Profit
What Is Market Manipulation?
Any activity that deliberately affects the value of a stock or asset is referred to as market manipulation. It can manifest itself in a number of ways, including insider trading, faking, wash trading, pumping, dumping scams, and many others. These acts are performed by individuals or organizations with the goal of making money off market fluctuations.
Why Do Exchanges Manipulate Trade Volumes?
The two main reasons why cryptocurrency exchanges do manipulation are below:
- Being the most well-known cryptocurrency webpage worldwide, CoinMarketCap (CMC) provides key graphs and fiscal metrics for all cryptocurrencies, as well as key showcases for all coins and tokens. The trading activity of various cryptocurrency exchanges is another important topic that CMC covers in great detail. Being strongly placed on CMC and the accompanying referral traffic from CMC could provide a major boost to the exchange and its operations.
- CMC has over 3 million daily visitors and has an Alexa rank of 438. Liquidity is the primary consideration for the majority of cryptocurrency traders and investors when dealing on an exchange, hence cryptocurrency exchanges have a strong interest to fudge their statistics to draw people to their platform.
- Tokens who want to list on top-tier cryptocurrency exchanges are required to spend startling sums of money, spanning from USD 50,000 to USD 1 million, as listing fees are a key component of exchanges’ economic models. Because token liquidity is the dominant driver that investors look for, exchanges with higher liquidity would have a higher listing cost due to the enormous volume of coins and tokens being generated by initiatives in the cryptocurrency market.
- This gives cryptocurrency exchanges the ideal motivation to greatly exaggerate their volumes in order to improve their ratings and charge a significant premium for the right to be listed on their platform.
What Are The Different Manipulation Techniques?
The absence of regulations is one of the most important elements that fuels market manipulation. Since the cryptocurrency market is mostly deregulated, investors’ and traders’ trading activities such as trading bitcoin using reliable bitcoin trading software are not subject to any limitations. Because of the lack of regulations, participants can more easily influence the market.
- The Pump And Dump Scheme:
This method entails a group of investors boosting a cryptocurrency’s price artificially through the distribution of favorable rumors, massive purchases of the cryptocurrency, and prodding others to do the same. The group sells its holdings after the price hits a particular point, which causes the price to plunge. For those that acquired the bitcoin at the inflated price, this causes substantial losses.
- Spoofing:
When a trader does this, he or she makes a sizable buy or sell transaction with the goal of canceling it before it is carried out. This behavior inflates supply or demand, which may affect the selling price of the coin. Then, as other traders adopt the fake trend, price swings may occur that do not accurately reflect the state of the market.
- Wash trading:
Wash trading is the simultaneous purchase and sale of the same cryptocurrency. This gives the misleading appearance that there is a high volume of trading, which may draw in additional traders. The price of the cryptocurrency may rise as a result of the increased trading activity, providing an opportunity for market profit.
- Claiming A System Breakdown:
The most frequent method of freezing trading on a platform involves an exchange claiming a hack, a 51 percent attack, or merely a system overload, leading to a closure or a freeze on cryptocurrency trading. This is done in order to steal money from retail customers and benefit the platform and the successful traders.
Conclusion
Given that the absence of laws is precisely the reason why so many individuals have chosen to invest in this asset class, it can be challenging to determine just how much regulations should be imposed on cryptocurrency trading. By reducing investor concerns, the crypto industry must keep its de-regulatory structure.