- Jun 23, 2015
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Cryptocurrency Market Manipulation: Kevin Pan
Many suspects that crypto markets are rife with market manipulation as it is highly profitable and often free of consequences. There are four primary ways crypto markets can be manipulated:
1⃣ Spoofing
Spoofing is to pretend to have an intent to execute a specific trade to affect market sentiment
Often done with setting large orders that don't get filled and are immediately pulled
Fake buy or sell walls can drive the price
Especially familiar in markets with margin trading
2⃣ Short and long squeezes
A short or long squeeze occurs when a price is pushed upwards or downwards by a cascade of margin calls
In cryptocurrency markets, where margin trading is popular, and regulations lose, short and long squeeze hunting is common
3⃣ Pump and dumps
A small group of traders gets a larger group to buy into crypto which drives up the price and attracts outsiders, then the original small group exits at the expense of the outsiders
Manifests as a sudden rise in price that's followed by a complete retracement in a short period
Often coordinated through Telegram groups
4⃣ Wash trading
Creating fake trading volume in a market to signal false interest
Traders can do this by buying and selling amongst themselves to artificially increase trade volume
Especially dominant in exchanges with low fees and altcoin markets
Cryptocurrency Market Manipulation: Kevin Pan
Many suspects that crypto markets are rife with market manipulation as it is highly profitable and often free of consequences. There are four primary ways crypto markets can be manipulated:
1⃣ Spoofing
Spoofing is to pretend to have an intent to execute a specific trade to affect market sentiment
Often done with setting large orders that don't get filled and are immediately pulled
Fake buy or sell walls can drive the price
Especially familiar in markets with margin trading
2⃣ Short and long squeezes
A short or long squeeze occurs when a price is pushed upwards or downwards by a cascade of margin calls
In cryptocurrency markets, where margin trading is popular, and regulations lose, short and long squeeze hunting is common
3⃣ Pump and dumps
A small group of traders gets a larger group to buy into crypto which drives up the price and attracts outsiders, then the original small group exits at the expense of the outsiders
Manifests as a sudden rise in price that's followed by a complete retracement in a short period
Often coordinated through Telegram groups
4⃣ Wash trading
Creating fake trading volume in a market to signal false interest
Traders can do this by buying and selling amongst themselves to artificially increase trade volume
Especially dominant in exchanges with low fees and altcoin markets
