Market manipulation has become a common thing in the cryptocurrency sector. Using this method, an individual or a group of people can influence an asset’s price or the market’s behavior artificially. For instance, a person can easily create false hype using fake news to either increase or decrease the value of a coin to gain profits.
Let us discuss the different market manipulation techniques and how they function in a crypto exchange platform.
4 Common Market Manipulation Methods
Pump and Dump
When a group of people willingly work together to create artificial inflation or deflation, it is known as pump and dump. In most cases, this manipulation occurs with the help of social media channels like Telegram, Reddit, and Discord.
Wash trading occurs predominantly in unregulated exchange platforms to get more commission and drag more users. In this technique, a group of individuals will buy or sell the same coin to create artificial inflation and feed misleading info to the market. This will increase the attention of customers toward the coin.
Whale Wall Spoofing
Whale wall spoofing is another market manipulation technique similar to wash trading. It happens even now in some less-regulated exchanges. In this strategy, a whale investor will place large orders to make the fake sell/buy, hence the name spoofing. After the sale, the whale will remove all of his sell orders and buy discounted coins in exchange for it.
In stop hunting, a whale will drive the price of a coin to an extent where other traders have marked their stop-loss orders. When the whale executes multiple orders, it will create high volatility, leaving an opportunity to rebuy coins at a lower price.
It is good to avoid these market manipulations to earn the trust of fellow cryptocurrency traders in the network.
Are you ready to kickstart your cryptocurrency exchange business? – Stay away from these market manipulations. Build a reliable exchange platform with aid from a cryptocurrency exchange development services providing enterprise.