Market Makers and manipulators have a large say in whether you profit or not. Learn more about what makes them work and their strategies in this article.
Market manipulation is a topic that often raises eyebrows and curiosity. Investors always hear about it in the news and in alpha threads without exploring the subject matter further. Among the key players involved in shaping the market dynamics, Market Makers hold a significant role.
In this article, we delve into the tactics employed by Market Makers to manipulate the crypto market and shed light on their strategies in different market conditions.
Market Makers?
Market Makers serve as crucial intermediaries in the trading ecosystem, creating liquidity and facilitating transactions. Their primary function is to provide continuous buy and sell quotes for financial instruments, enabling smooth trading for investors. By maintaining the bid-ask spread, Market Makers profit from the difference between the buying and selling prices.
Two Types of Market Makers:
Market Makers with project advising:
This category of Market Makers focuses on advising and supporting specific projects in the cryptocurrency space. They collaborate with emerging or established projects to assist them in achieving liquidity and market stability. These Market Makers often have a direct impact on the success of the projects they advise.
Traditional Market Makers:
Traditional Market Makers primarily concentrate on larger-scale projects with substantial market capitalization. Their overarching objective is to maintain stable price levels, ensure liquidity, and develop effective trading strategies, particularly during token unlocks and significant market events.
Market Manipulation Strategies
The strategies employed by Market Makers vary based on the prevailing market conditions, be it a bear market or a bull market. Let’s explore some of their common tactics:
Bear Market Strategies:
In a bear market, where prices are falling, Market Makers aim to create a sense of stability and prevent panic selling. Some of their strategies include:
Absorbing Sell Pressure: Market Makers strategically place buy orders to absorb selling pressure and prevent significant price drops.
Smoothing Volatility: By entering large buy orders or placing limit orders, Market Makers can smooth out price fluctuations and minimize market turbulence.
Controlling Spread: Market Makers may widen the bid-ask spread during a bear market to protect their positions and manage risk.
Bull Market Strategies:
During a bull market, when prices are rising, Market Makers capitalize on the positive sentiment and market momentum. Their strategies typically involve:
Generating FOMO (Fear of Missing Out): Market Makers create hype and artificially inflate demand by strategically promoting and marketing certain assets.
Pump and Dump Schemes: Although illegal and unethical, some Market Makers orchestrate pump and dump schemes to manipulate prices. They artificially pump up the price of a cryptocurrency and then quickly sell off their holdings, leaving unsuspecting investors with significant losses.
Manipulating Liquidity: Market Makers may control the availability of liquidity by adjusting bid and ask orders, creating an illusion of high demand or scarcity.
Final Thoughts
As cryptocurrency markets continue to evolve, it is essential for investors to understand the tactics employed by Market Makers to manipulate prices and influence market behavior. While some Market Makers operate with integrity and contribute to market stability, others may engage in questionable practices. As investors, it is crucial to stay vigilant, conduct thorough research, and make informed decisions based on reliable information and market analysis.
Don’t be shy to revisit this article in the future to brush up on your knowledge.
Edmond is a passionate writer for Video games, GameFi and Web3. He has worked for top GameFi companies and video game/crypto news websites.
