Market manipulation in digital currency is an effort to influence the price of assets or market behavior artificially. It usually engages individuals or people in groups looking ahead to create a farce found in the market to make a profit later. For instance, you can find too many people involved in finding out the price of penny stock and fake news, thus adding profit at the peak. For example, in 2018, we saw the DOJ develop an investigation to determine if there is some manipulation in Bitcoin price. We can find the market for digital currency to be still young and competitive, which means a lot in this market. We can find the digital currency market to be still new and evolving. It means you can find too many bad actors playing different ways to exploit as far as lack of regulation is concerned. In this article, we will discuss dealing with market manipulation in Bitcoin or any other digital currency.
Market and Currency Manipulation
Digital currency market manipulation is different from currency manipulation; hence no one should get confused about it. Only the authorities, like the banks, have the choice to manipulate the currency. It is more of a legal thing; however, the other nations can challenge the same. For instance, many more governments are addressing this problem and reducing the currency’s value in a big way. It is often called devaluation. Check out here to know more about Bitcoin.
Common Strategies for Market Manipulation
There are four popular strategies for market manipulation; how about checking them as under:
- Pump & Dump: The digital currency market is often called a prevalent offender, and it moves around an array of people who are seen working together to inflate the value of the coin. These things can market many more low market cap coins and make limited exchanges. Lately, we have seen this strategy becoming widespread worldwide, and it has remained more accessible on social media platforms like Discord and Telegram, to name a few. Recognizing the names can help in making things work.
- The Whale Wall Spoofing is among the standard ways of using BTC in their early days, and we can see how things have remained less regulated in recent years. For instance, if you are keen on buying or selling these walls over the order book, you can think of naming it as spoof down. The moment you see the whale removed and then selling the orders, you have the choice of selling it with some discount money.
- Wash Trading: It is very much similar to the ideas of whale wall spoofing. The reasons are simple both of these are seen as misleading the info in the market. The strategy mostly moves around people or groups of people busy buying and selling the same number of digital coins for inflating the volume in a big way. It helps boost the assets in a big way and get the attention of the investors and traders in a big way that can help in distorting the price in a big way.
- Avoid the Hunt: It engages whales driving over the price of digital currency and then allowing the level to boost up the market participants in engaging the orders. Most people are now seen stopping the orders and then moving to the top technical levels.
Dealing with Market Manipulation in Digital Coins Domain
- Monitoring the market manipulation is often a tricky affair. You can compare it with the hide and seek game. You have to stick to the rule of researching as it is essential due to diligence and then invest in the coin like an asset. The following ways you can deal with this issue.
- Crosscheck the diverse sources: Avoid relying on one source information, including the order book, to verify your assets’ movement.
- Pay heed to only the historical prices trends – Whales can give you inflating the volume by carrying out the wash trades over multiple exchanges.
- Compare the long-time contracts with everlasting futures: The exercise can help you get unbiased market results and thus move smoothly ahead in the market.
- Add diversity to your profile – Your profile of digital coins should have a good blend of assets as per your risk more enormous. To put it in a nutshell, you need to avoid putting all your eggs in a single basket.