Crypto market manipulation is a way of leveraging crypto market trends in purpose to intriguing other traders in favor of their self interests. Before I list 3 major ways to avoid market manipulation, we need to understand what market manipulation is in blockchain. The market is a vulnerable place where every entrepreneur looks forward to growing and meeting their interest. It is a place to trade. Therefore, if the price of products and services is manipulated it leads to making wrong decisions.
Crypto Market manipulation is the rate at which people give wrong information about the price or quality of an asset. Market manipulation is like pump and dump. The prices of certain cryptocurrencies are made to rise by market manipulators where they buy stocks at large quantities with an expectation to sell at high prices. However, after a while, they dump prices in the market causing the price of an asset to go down or crash. This results in huge losses from investors afterward.
Bitcoin is a decentralized (Defi) digital asset that easily promotes online transactions. Bitcoin has been a great backbone to blockchain and Web 3.0. Most of the currently traded cryptocurrencies implement bitcoin protocols. Therefore, market manipulation in Bitcoin is an ideal concern to their traders.
How to avoid crypto market manipulations will be explained in deeper length in this article.
What is Crypto Market Manipulation
Trading, staking, and crypto exchange are some of the call values that constitute traffic in blockchain. Since the introduction of Bitcoin as the first online asset that geared online transactions, various coins have been put on board to facilitate online transactions and crypto trade.
To understand in deeper detail what crypto market manipulation is, first, you need to take note of the operations of the crypto market and what it entails.
The crypto market is a set of all released cryptocurrency exchanges that allow traders to explore their interest in various blockchain assets. In other words, the crypto market is an open platform for cryptocurrencies where crypto traders can access their interested blockchain assets or run their exchanges via certain exchanges.
There are two types of crypto markets; an exchange crypto market and a crypto trade market.
An exchange crypto market is where the exchange website controls the buying and selling of cryptocurrency to walk in hard with the set rules and regulations. In this market, the exchange rate, price, and market promotion are 100% controlled by the exchange websites. It entirely relies on the buying and selling of cryptocurrency.
A crypto trade market is an exchange where crypto assets that have passed the listing regulations are traded on the exchange websites. In this crypto market, marketing regulations and prices are much appreciated by the buyer and the seller. This results to more chances of crypto market manipulation.
Therefore, crypto market manipulation is the rate at which certain cryptocurrency prices or exchanges are highly promoted or pushed in the market. The aim and purpose of manipulating the market is to achieve a bullish or bearish market where more traders are attracted to invest or discouraged from trading.
crypto market manipulation consists of insights where the information provided in social media, the rise or fall of certain exchanges is not true or of relevance.
Most crypto market manipulators consist of traders or investors who target a certain coin or newly launched coins in various exchanges and suddenly push the market to a high level then resell at once when the market is more bullish. These crypto market manipulators are crypto whales. New traders may find their money being liquidated or depreciating more so traders who practice perpetual features. Careful considerations and research should be kept in place to avoid being victimized.
A tweet by LycAn_OW demonstrates the effects of crypto market manipulations and how much money can be lost. The link provided leads to the insights of the tweet.
Note that cryptocurrency is the only currency that can face market manipulations as the government has no power over blockchain. Other currencies can only be manipulated by the government. Crypto manipulations are illegal and ethical practices should be applied in every market.
How Crypto Market Manipulation Operates
Crypto Market manipulation consists of traders who can be termed as crypto market whales who are responsible for pushing the prices of cryptocurrency to a point of their interest. Newly launched cryptocurrencies are victims such that they buy more stock encouraging other buyers to invest.
To be precise, crypto market manipulations entails three parties. These parties include crypto whales, cryptocurrency investors and small market traders. These parties are responsible for grading or downgrading the price of cryptocurrency assets to the market trends. There must be a deceiver, the one who is being deceived and the distant benefactor or loser. These benefactors may include the coin launchers, investors or the exchange itself.
Note that for any market to be manipulated there must be a purpose and mission. Take for instance if a crypto asset such as Bitcoin is manipulated to rise by 40% by next month, this means it will gain popularity and encourage more traffic. However, if the manipulations did not come from its original investors, shareholders or by normal market trends but came from a group of traders. If they happen to withdraw their interest, the shareholders, small market traders are affected by the result.
The mission and purpose of the group of traders who control the market is to encourage other small market traders to join the trend and withdraw their funds when market is at pick. This triggers the market trends resulting in an unreliable market.
However, at times both parties may benefit from crypto market manipulation if it comes from the original investors. Such instances are rare in the crypto market. They happen occasionally where the crypto whales sponsor the market in the purpose of just making profit and only withdrawing it. This means their funds remain intact therefore the market remains stable.
To understand how crypto market manipulation operates consider these factors. Let’s say a social media post explains a new trend of payment with a certain cryptocurrency. For instance, a post by Tesla CEO saying that they will be accepting Bitcoin payment in their service. Now the post comes from a group of investors who are targeting people who are less informed on social media and they start placing large trades.
The mission and purpose is to encourage other traders to join the market. Good traders will keep off the market and stay safe. However, these market manipulators have nothing to lose. They only need to secure their search and imply various factors and features that will be discussed further in this article to deny some few traders. Once other traders join the market they and the price of Bitcoin goes up they withdraw their funds.
When such instances happen, other traders start exiting the market resulting in further falling down of the market. Nevertheless, if other traders can keep with the market and keep holding less casualties will be experienced. Such scenarios happen to small or newly cryptocurrencies which can even result in liquidations. Therefore, measurable precautions should be put in place before joining the market.
Features Associated with Crypto Market Manipulation
Only when crypto market manipulation feature are put in place, a trader can identify a manipulated market. Crypto market manipulation features are eye guides for traders to evade falling in the trap of crypto whales.
Note that Bitcoin consists of large traffic both in trading and exchange.Therefore, there are valid reasons why bitcoin traders should be aware of these features associated with crypto market manipulation.
Pump and Dump
Projects may launch with vigorous marketing and promotions to lure investors, thus driving the value of the asset high. Remember the value of an asset rises with increasing buying pressure. As such, the team may partner with selected investors to buy large amounts of a particular asset, thereby forcing the price to go high.
However, the team may decide to dump large amounts of its holdings to the market at a throwaway price. This increases circulation, and thereby the value of the token goes down. There are also instances of pump and dump, whereby the project dumps all the tokens into the market and closes business. This form of pump and dump is also referred to as a rug pull.
In a pump situation, most of the traders join the market at the top with the hope the trend will keep rising. However, such trades only the whales end up benefiting but early traders might get a lack of gaining profit if they keep the trend of limiting orders and placing stop-loss features.
The pump and dump features and where traders get trapped to make losses. As a Bitcoin trader, it is better to be aware of rag-pull control measures to avoid crypto market manipulation.
To avoid the traps of pump and dump, traders need to be aware of who is behind the promotion of the trades. Research keenly on promotions made on Discord, telegram, or any other social media about cryptocurrencies and Bitcoin. Be keen before trusting the information.
Rug Pull
A rug pull takes place when the team behind a cryptocurrency project dumps tokens to the market and closes business. Sometimes, the team may even disappear. Before pulling the rag from a project, the team usually attracts large numbers of investors using vigorous promotional tactics and a strong utility thesis. A rug pull may also happen when the team withdraws all investor funds backing the project, hence rendering it worthless.
Wash Trading
Wash trading happens when a project performs insider trading of an asset until the price goes high. This form of market manipulation is usually popular in NFT markets, where certain collection owners keep buying the same token continuously until the price of the asset goes high. Wash trading is often a strategy for inflating volumes to entice investors and commissions.
Wash trading affects individuals and crypto whales to trade on a manipulated market. This aspect of wash trading can result in a crash or liquidation. The reason is that wash trading involves its original investors. This feature has less effect in bitcoin and it is hard to identify since the trade data is only accessed by the mining team.
A good example of washing trading is when one buys a stock lets say $ 10000 and sells it at the same time. He/she buys the same stock again at the same price and sells lets say $15000 when market is manipulated.
Stop Hunting
Stop Hunting is a market manipulation method where a whale sells large amounts of a token to drive the price to every point where there is a stop order. This creates low demand for the asset, until a point where the whale can purchase a large amount at a lower price. Stop hunting is possible through technical analysis considering that the majority of the market places their orders around the same technical levels.
Stop hunting is like a scene where the whales target the small fish. Crypto whales trade on purpose to liquidate small traders with less vigorous stop losses. Stop losses are placed to help evade pump-and-dump scenarios or control the amount of money that could be lost in a trade.
A tweet by Edward Gofsky demonstrates the effect of stopping hunting and how it is built. Consider checking this link.
Whale Wall Spoofing
In whale wall spoofing, a whale places large fake orders to drive particular market sentiment. These wall orders usually appear on the order book, hence the name spoofing. An example of a whale wall spoofing a bearish sentiment would involve a whale placing a large sell order to drive panic selling. When the market sells, the price goes down and the whale can purchase the tokens at a discounted price.
To avoid being a victim of a crypto manipulated market. One needs to fully understand and be at ease to spot a manipulated person. The features are one tool to avoid being a victim of manipulations. Nevertheless, bitcoin traders need to have more know-how of the risks associated with bitcoin market manipulation. The reason is that most of the features listed above may not affect blockchain since tight measures have been put in place to govern Bitcoin and reduce market manipulation.
Crypto Market Manipulation Features that Affect Bitcoin and How Traders Can Avoid Them
Due to web 3.0 technology advancement, online transactions have been greatly of value to institutions and businesses. As a result, Bitcoin is an added advantage due to its value and legitimacy. Most institutions and businesses trust and therefore place their future interest in Bitcoin. The reason is due to its scalability and diligence in offering secured transactions. Also, traders have total trust in Bitcoin as they can trade, transact, and stake with less risk management.
However, crypto whales have found loopholes that affect Bitcoin traders. Note that in blockchain, most of the cryptocurrencies are controlled by crypto whales. Therefore, every trader in Bitcoin needs to understand the tricks used by whales to manipulate the crypto market.
Hidden Orders
Hidden orders entail placing a detectable amount of a trade which is recorded on the order book. These orders are in large amounts and the trades spoof the amount in the order book to make it not detectable by other traders. What other traders access is the high buying of traders so they are deceived. Coins such as bitcoin skyrocketed thus other traders trading with an expectation to maintain a bullish market.
Bitcoin is considered as a measure of trade to most cryptocurrencies. In most cases, if the Bitcoin price goes high it results in other cryptocurrencies going up or appreciating. As a result, whales place large orders that are recorded in order books. As the traders are amazed by the rise, they purchase more orders. However, crypto whales sell their trade when they get to their target level thus resulting in a bearish market. As most traders are slapped by the fall of the prices, they hurry to sell to save their trade from resulting in losses. As a result, the price goes down which whales take advantage of again to buy let’s bitcoin at a profitable value.
Hidden orders constitute a volatile market where traders make unproductive decisions when placing their orders. It is of great concern to learn the tricks of hidden orders to make the right decision when trading with Bitcoin.
Forced Liquidation
Liquidation in crypto is the point at which a trader loses his/her initial trading income. Liquidation mostly occurs in perpetual trading and the affected parties are short-time traders placing short trades that require small capital. Whales place large trades that are against the trade market. Note that perceptual features have no set expiry dates. Perpetual features do not favor any bearish or bullish market. Therefore, perpetual features are unbiased tools.
Crypto whales may side on either bullish or bearish markets by placing long-term trades that even last for days. They sell their trades once it has reached the desired point. This results in other traders who rely on the visible market swings and trends to place their orders losing all their money or most of it. They fall on the trap of whales to sponsor crypto market manipulation.
Even if it is difficult to predict the direction of the liquidation point, one can study the cuddle stick and directions of the signal line to understand the direction of the liquidation.
An ascending curve is formed in a normal trade. However, a flat or invented curve signals that the whales are leaning on the bearish market waiting for the value of the asset to go down. Therefore the whales are against the market and are manipulating it to go down to make profits. With these indicators, it is easy to evade the trap of market manipulation in Bitcoin or any other cryptocurrency.
Wash Trading
For every crypto market manipulation, whales are mostly used to implement this distress method. Wash trading involves whales posting large trades of various cryptocurrencies such as Bitcoin and Ethereum to famous exchanges such as Binance.
Bloggers and marketers are paid to manipulate small exchanges on current trends of the sponsored coins in large exchanges. This attribute results in traders making the wrong decision by following the current market trends. As a result, they are deceived and the fate of their trades is determined by the whales. To avoid this trap, traders should stop relying on individual trades and consider longer price trends.
How to Deal with Crypto Market Manipulation
Crypto Market manipulation is one factor that affects bitcoin and all other cryptocurrencies. Therefore there is a need to carry out research before venturing to any blockchain protocols. Consider reviewing the history and trends of every coin before investing or engaging in any exchange.
Don’t rely on a single source of information such as social media or order books. Research all fields that relate to your interested crypto assets. Also, engage other experts in bitcoin or traders to have concrete information. Note that crypto whales target less informed traders or blind investors.
If you are new to bitcoin exchanges and trades consider running your exchanges or trades to popular and reliable exchanges such as Binance or OKX. such exchanges help evade chances of falling into traps of market manipulation.
Conclusion
Crypto market manipulation is a major concern in blockchain and should be taken care of. Investors, traders, and whales should have a clear approach to placing orders and offering transparent transactions. However, Bitcoin being a pivot to most exchanges and trades, market manipulators should evade the trends in Bitcoin as it can result in large losses in the whole blockchain market.
Bitcoin traders should engage themselves in learning other crypto signals. Also, bitcoin servers should encourage community building and have scouts that monitor all the trends in social media platforms and educate and inform their communities in case of market manipulation in various social media.
