Today, I was thinking about the current market conditions and I was pondering to what extent what we are seeing is artificial. We can conclude beyond any doubt that there’s some form of market manipulation but to what extent? We may not be able to tell. The cryptocurrency market is known to be a free and commendable market that allows dynamism and leverage trading. This has been of great help to holders and users of the coins as it has enabled them to do various business with ease and needless to go through vigorous process to achieve internet buying and selling. However, the platform is becoming biased and easily corruptible due to its decentralized and unregulated nature. Being a free and open source platform has made the market growth large but not without some drawbacks. The crypto platform has become a market that can be easily manipulated by cyber wizards and differnt exchange providers because of its lack of governance and regulations. The rate at which exchanges are manipulating the crypto coins and making so much efforts to overpower it is a rising fear in the crypto market.
The integrity of cryptocurrency markets all over the world has often been questioned as other exchange has made investors believe it just takes one click to tamper with it and the market has no fighting power because they have no serious regulation backing it. This has been made known through the innovations of other exchanges that are more secured and as they are trying to break into the market with a rapid growth and planting doubts in the mind of starters and small investors especially.
The implication of this occurrence is that the exchanges stand to gain so much from this manipulation by so many means that will be discussed shortly.
Ways In Which The Cryptocurrency Is Being Manipulated
Most times the manipulation of the cryptocurrency market comes from some set of rich people known as “whales”. They exploit the market for their own benefit through the following ways:
Accumulate The Coins And Extract Profit
This tactic is a process whereby the whales gradually acquire a particular coin within a short period of time. This will trigger a rise in the trading price of the coins and attract new, often times novice investors to it. When these investors consider the trade and buy into it, it will bring more money to the coin and the infusion of this money from investors will lead to an higher increase in the price value of the coin. When the rise in price has reached a profit level they want it to, they will start dropping the coin gradually and extracting the profit from it. At this rate, investors will also think it’s a bonus for them and buy into it again until the whales will extract all the profit including the investors money and leave the investors hands dry. This is possible for the whales to tamper with because of the liquid form of the coins, especially the low market value coins.
Moles On The Inside
The whales usually have an inside man that gives them informations (this is also a functional problem of an uregulated platform) about the release of a new coin before it gets to the market. As a result of this, the whales will propose to sell the coin at a cheaper rate before it is out through developing a service that will be very attractive and profitable to investors yet cheap. Investors will see this and place their own orders before hand. By the time the coin is out for sale, all the orders placed will be sold by the whales and this will result to losses for the crypto business.
A lot of financial institutions involve in anonymous exchange so the whales manipulate it by placing attractive business deals anonymously on the platforms and getting their gain from it. This does not affect the public market of the cryptocurrency so they can get huge benefits from the coin without it reflecting in the public market value.
The cryptocurrency market should take note of this market conditions and try to improve the sector by introducing some regulations. Though, as a young market, the crypto platform is growing and helpful but is also liable to manipulation for its lack of ordinance.
Cryptocurrency was created as a revolution, to provide an escape for people who are tired of government and bank restrictions on international transactions and money transfers. As we all have seen, cryptocurrency has done more than that, it is a multibillion dollar economy that is causing innovations in the fintech sector as well as others. Hence, we have to be able to combat the challenges before the crypto sector crumbles completely.
I’m a strong proponent of the free market, but one must be left to think is what we are experiencing blatant systematic manipulation of the market? Is it the time we start to think about some means of governance over exchanges? However, bringing in government into the crypto sector undermines the whole premise of our revolution, and I feel very internally conflicted on this issue. I don’t believe government intervention is the correct solution as exchanges can just change their base of operations to whichever country favors them. I think there should be some form of regulation, not necessarily governmental, but some means for third party to have a more unbiased look under the hood of the inner workings of the exchanges.
So, I leave you today with these questions in mind. Is what we’re experiencing blatant manipulation and what are some solutions going forward to combat potential exchange corruption?