Since there have been markets, there has been manipulation. From the Mesopotamian merchant who had his thumb on the scale, to America’s first insider trade, markets will be manipulated simply because they’re there.
Duer was privy to all of the Treasury’s actions and would tip off his friends and trade his own portfolio before leaking select information to the public that he knew would drive up prices. Because public blockchain data can be accessed by anyone, it’s not difficult to see insiders taking advantage to make some easy money.
While blockchain analysis can determine that a particular cryptocurrency wallet address was prescient in knowing which tokens to hold on to and when to let them go, what can’t be determined is who actually owns it. “Market making” in that sense was really just wash trading, where various accounts on an exchange traded with each other, representing a far more liquid and active market than otherwise existed in order to lure real human traders in.These wash trading bots could even manipulate price charts, order books and create a parallel universe that an active market existed for a token, which was simply a work of fiction.In October 2013, over US$6.
Also known as “layering” the order book, spoofing involves placing multiple, non-genuine orders on one side of the order book to manipulate perceptions of the trading environment. During periods of high volatility in the cryptocurrency markets , traders who fear missing out or are trying to get out place what’s known as “market orders “— whatever price the market will give.
So the exchange also knows how much of a price move is needed to ripple through a whole stack of liquidations and typically, it’s not a lot, because most traders post a minimum margin to hold the position open. The other sort is where insiders corner the market for a particular token, wash trade to lure in other traders to come in while bidding up the price, and then dump all of the tokens acquired earlier on the unsuspecting bag holders as they come in.
What perhaps makes cryptocurrency markets that much more degenerate than casinos is because they’re not regulated, there’s no watchdog that is there to stop the most egregious forms of market manipulation being perpetrated on investors, especially retail.