The dark side of cryptocurrency: How to use trading quantity for market manipulation
Cryptoraces have been welcomed to the future of finances, and many experts predict that they are revolutionizing the way of thinking about money and commerce. However, despite their potential, cryptocurrencies do not pose a risk. One of the most significant risks is market manipulation, which can have far -reaching consequences for investors and the entire financial system.
What is market manipulation?
Market manipulation suggests that individuals or organizations artificially affect the price of security, such as cryptocurrency, to gain unfair benefits. This can be done by various means, including the distribution of false information, manipulating market data, or involving other forms of intentional market intervention.
The role of trading quantity
Trading volume is one of the most important indicators used by merchants and investors to assess market emotions and liquidity. When the trading volume grows rapidly, this often indicates a strong offer distribution where customers and sellers are willing to trade at different prices. However, in the context of cryptocurrency markets, high trading quantities can also be used as a sign of manipulation.
How to use trading quantity for market manipulation
There are many ways to use high trading quantities for market manipulation:
- Create a false feeling of liquidity : By increasing the craft of a trading volume, you can create more buyers and sellers than in reality. This can increase prices and make it difficult for real investors to buy or sell their wealth.
- Distribution of false information : High trading volumes can be used to distribute false news or propaganda on a particular cryptocurrency or market trend. This can create a false narrative that leads price movements, even if there is no actual cause of change.
- Manipulation of supply and demand : artificial increases or reduction of trading volume can be manipulated by the attribute of a particular cryptocurrency or device.
Examples of market manipulation in the cryptocurrencies market
- The Bitcoin Bubble of 2017 : During the 2017 cryptographic bubble, the Bitcoin trading volume increased significantly, led by speculation and Hype. As a result, prices rose rapidly, reaching the unsustainable level.
- The 2020 FTX scandal : In November 2020, it turned out that the FTX, the outstanding cryptocurrency replacement, to manipulate high trading quantities, create a false narrative of strong liquidity and price stability.
- Coincheck Hack : In January 2019, the Japanese cryptocurrency exchange was broken Coincheck, resulting in about $ 523 million (about $ 700 million at USD at current prices). The trap was allegedly used to create a fake ICO for a new cryptocurrency, which was then pumped by a high trading volume.
The consequences of market manipulation
Market manipulation can have far -reaching consequences for investors and the entire financial system. Some of the potential risks are as follows:
- Systematic risk
: If market manipulation is widespread, this can lead to systemic breakdown of trust throughout the markets.
- Financial losses : Investors who buy or sell assets based on manipulated data may suffer significant losses if the price movement is not made by real basic factors.
- Regulatory Control : Market manipulation attracts regulatory attention, which can lead to fines and punishments for those involved.
Conclusion
Cryptocurrency markets remain at an early stage of development, and market manipulation remains a significant risk.
