Market Manipulation in Crypto Trading (Part 1)

While it’s something that can happen in any financial market, the crypto world being relatively new and less regulated has seen its fair share of such antics. Market manipulation is when individuals or groups artificially influence the price or supply of an asset to profit at the expense of others. In crypto trading, this could involve creating fake demand, spreading misinformation. Imagine, a group of traders hypes up a relatively unknown crypto and it driving up its price. Once the price skyrockets, they sell off their holdings. A group might flood social media with posts about a coin being the "next Bitcoin." People FOMO (Fear Of Missing Out) in, the price pumps, and then poof, the hype vanishes. A single entity buys and sells a crypto asset back and forth to them. This creates an illusion of high trading volume. Others into thinking the asset is in demand.

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People often equate high volume with popularity or stability.This involves placing large buy or sell orders that the trader never intends to execute. The idea is to manipulate market sentiment. For example, let a trader places a massive sell order for Bitcoin, causing panic. Prices drop, and the trader cancels the order. This is scooping up coins at a discount. Again by spreading negative rumors or fake news, manipulators cause panic selling. For example, a fake tweet claiming a government ban on Bitcoin can trigger a market downturn. This will give manipulators a chance to buy cheap.Some people get early access to price-sensitive information about a crypto project. They trade based on this information before it becomes public.

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VEIGO (Community Mod)

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