Market Manipulation on Exchanges
Here at Crypto Clothesline, we’ve asked a number of experts and enthusiasts in their fields to comment on the areas of interest that came up in the interview with CryptoGat (Ivan S.) has over 70k followers on Twitter and recently had a fall from grace after he was found to be part of a market manipulation scheme.
Matt Morrison of BlockBoxx on Crypto Clothesline: commenting in regards to our interview with CryptoGat, on market manipulation in the cryptocurrency market.
Matt explains that due to the lack of regulation, whales (people or a group of people working together to hold a large percentage of a coin: their advantage is to manipulate its price), exchanges and certain groups are involved in market manipulation. They buy their cryptocurrency ‘over the counter’ (OTC) while it’s at a low, so it doesn’t affect the market price. They then go ahead and drive the price up and start selling as they go.
This conversation comes as no surprise considering the recent investigation by the US Commodity Futures Trading Commission (CFTC) delivering a subpoena to Coinbase, Kraken, Bitstamp, and ItBit. All four exchanges are being investigated for trading fraud in the crypto market. “The exchanges have been ordered to hand over their complete trading data in order to assist the regulators in their bitcoin manipulation probe”
But of course, market manipulation and financial fraud are not a new phenomenon. In the 1800’s traders once tried to corner the gold market and in the 1950s there was a rather humorous attempt to buy up every onion in America to dictate the price and corner the market. To add a little more humour to the giggle pool, due to a regulatory backlash back then, onion futures were actually made illegal in the US. (Gives new meaning to flash-in-the-pan deals.)
All jokes aside, Matt goes on to give the advice to young people:
“…don’t chase the pumps, you’ll see it on the exchanges and think you’re missing out, try and jump on it and take a ride. By the end it’s too late, you’ve bought at an all-time high and get left holding a coin that’s worth less than when you bought in.”
Due to the risky nature and volatile market, young people who are more inclined to take risks, should be more careful.
The cryptocurrency market is in its early stages which is why there appear to be plenty of opportunities to make a quick buck, however it’s also extremely susceptible to market manipulation when compared to our traditional markets.
Proceeding with caution is a rule that newbies should take note of: especially considering many traders still operate with emotion not logic. Matt explains that people don’t understand the cryptocurrency space and are affected by FUD (Fear, Uncertainty and Doubt) and FOMO (Fear Of Missing Out) and really need to do their own research.
“When people consider coins they need to consider people’s motivation for getting in.”
Due diligence is required rather than following blindly.