OP 05 October, 2023 - 02:45 PM
(This post was last modified: 09 October, 2023 - 03:51 PM by IDaredevil. Edited 3 times in total.)
Market manipulation is dishonest actions that take place in the market to artificially increase or decrease the price of an asset. This may include spreading false information, mass selling or buying of assets to create false supply or demand. As a result, manipulation can lead to unfair prices that do not reflect reality and damage to investors.
There are various ways to evoke the right emotion in traders and investors, but there are 4 tools in the arsenal of market makers that are used in the crypto market especially often and effectively. We will talk about them below.
Wash Trading is a way of trading in which large holders sell a certain asset to themselves in order to mislead retail investors by creating the illusion of activity. It's simple: candle red, candle green, repeat. There are 2 main reasons for using wosh trading:
Pump&Dump - pampers spread information that gives investors a sense of a promising coin and, accordingly, increases demand for the asset, and with it the price. When the price reaches the right level, the pampers drain their pre-stocked shields, simply unloading into "greedy" investors.
The main ways to provoke Pump&Dump:
The essence of this manipulation is that big players open short positions and start spreading negative news about the asset, i.e. fad. In case of success, FUD will provoke panic among investors and they will start closing long positions, i.e. they will essentially become fuel for shorts.
Spoofing is a method of manipulation through the placement of fake orders that are canceled before they are executed. Since one of the basic trend indicators for traders is the number of buy and sell orders, fake orders provoke decisions favorable to the manipulator.
There are various ways to evoke the right emotion in traders and investors, but there are 4 tools in the arsenal of market makers that are used in the crypto market especially often and effectively. We will talk about them below.
Wash Trading is a way of trading in which large holders sell a certain asset to themselves in order to mislead retail investors by creating the illusion of activity. It's simple: candle red, candle green, repeat. There are 2 main reasons for using wosh trading:
- Creating the appearance of activity or demand for the desired currency/trading pair.
- Artificially increasing trading volumes in order to pay the exchange, disguising it as a commission.
Pump&Dump - pampers spread information that gives investors a sense of a promising coin and, accordingly, increases demand for the asset, and with it the price. When the price reaches the right level, the pampers drain their pre-stocked shields, simply unloading into "greedy" investors.
The main ways to provoke Pump&Dump:
- Hype: "This is the next bitcoin", "Ethereum killer" and loud statements of this kind create optimism among investors, but in 95% of cases it is just speculation and more of a red flag than a reason to buy.
- Price spike: if a newtoken grows rapidly in a short period of time, you should be careful. Parabolic growth may just be retail bait.
- News cycles: positive news coincides with big whale buys. This creates a sense of "smart-money", successful event trading and "whale insiders", which in turn causes retail to buy more, mimicking the whales.
The essence of this manipulation is that big players open short positions and start spreading negative news about the asset, i.e. fad. In case of success, FUD will provoke panic among investors and they will start closing long positions, i.e. they will essentially become fuel for shorts.
Spoofing is a method of manipulation through the placement of fake orders that are canceled before they are executed. Since one of the basic trend indicators for traders is the number of buy and sell orders, fake orders provoke decisions favorable to the manipulator.
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