The Dark Side of Cryptocurrency: As a trade volume can be used for market manipulation
Cryptocurrencies are welcomed as the future of the financial, and many experts predict that they will revolutionize how we think of money and trade. However, despite their potential, cryptocurrencies are not at risk. One of the most important risks is the market manipulation, which can have far -reaching consequences for investors and the entire financial system.
What is the market manipulation?
The market manipulation applies to any person or organizations to artificially influence the price of such security, such as cryptocurrency, to gain unfair advantages. This can be done through a variety of means, including the dissemination of false information, manipulation of market data, or involvement in other types of deliberate market disorders.
Role of trade volume
Trade is one of the main indicators used by merchants and investors for market sentiment and liquidity. When trade increases rapidly, it often points to a strong price promise if buyers and vendors are ready to trade at different prices. However, in the context of cryptocurrency markets, large trade volumes can also be used as signs of manipulation.
As a sales volume can be used for market manipulation
There are several ways to use large trade volumes to manipulate the market:
1
Creating False Liquidity : By artificially increasing the volume of trade, it is possible to create the illusion of more buyers and sellers than exist in reality. This can raise prices and bother buying real investors or selling their assets.
- Distribution of False Information : High trade volume can be used to spread false news or propaganda on a certain cryptocurrency or market trend. This can lead to a false narrative that drives price movements, even if there is no actual reason for changes.
3
Manipulating supply and demand
: It is possible to manipulate the supply of certain cryptocurrency or the value perceived by certain cryptocurrency.
Market Manipulation Examples in Cryptocurrency Markets
1st
2017 Bitcoin Bubble : 2017 During the bubble of 2017, the amount of bitcoin trade increased significantly during the bubble bubble, caused by speculation and HIPE. As a result, prices rose rapidly, reaching an unsustainable level.
The FTX Scandal of 2020 **: In November 2020, a significant cryptocurrency stock exchange FTX appeared to use large trade volumes to manipulate its market data, creating a false narrative of strong liquidity and price stability.
3
2019 Coincheck Hack : In January 2019, the Japanese cryptocurrency stock exchange Coincheck was hacked, resulting in theft of about $ 523 million (approximately $ 700 million at current prices). It is reported that Hack was used to create a fake ICO for a new cryptocurrency, which was then pumped with a large trade volume.
Market Manipulation effects
The market manipulation can have far -reaching consequences for investors and the entire financial system. Some of the potential risks are:
1
Systemic risk : If the market manipulation was widespread, it could lead to systemic confidence in general.
- Financial loss : Investors who buy or sell assets based on manipulated data can cause significant losses if the price movement is not contributed to truly fundamental factors.
3
Regulatory Test : The market manipulation can attract regulatory attention, causing fines and penalties to those involved.
Conclusion
Cryptocurrency markets are still at an early stage of development and the market manipulation is still a significant risk.