Hacks and IT vulnerabilities have been reported in crypto exchanges in the past. It is no secret that manipulation and fraud on crypto exchanges are highly valued. It is difficult to trust the price movements, because the suspicion that Insidertrades control the ups and downs persists. And rightly so.
In the meantime, short positions are also possible, so that it can also be set on falling prices, the incentive to manipulate prices is even greater. In addition, it has become even cheaper with the help of leverage up to 50 times the capital invested. When the "big Wall Street Boys" enter the market, they can easily manipulate the small and unregulated crypto market.
This is how the stock market manipulation works
Specifically, some actors have managed to program a technical information advantage. This informational advantage allows them to see when market participants place orders. As a result, they can find out, among other things, which brands have made important stop order orders. Accordingly, they can see in front of all other market participants, when the house of cards collapses and make a good deal with short positions.
So it often happens that huge price moves whip the market up or down without a market cause can be identified. Most traders then look at the Bitcoin price at a loss and ask themselves which fundamental or chart technical impulses triggered the suction effect - without result.
Wash Trading promotes high volume
In addition to individual traders, it is even the stock exchanges themselves that are repeatedly under suspicion of manipulation. For example, the crypto exchange BitForex Wash Trading is said to have operated. In the case of wash trading, the high-frequency buying and selling of assets creates a high trading volume. To the outside one wants thereby to give the impression that it concerns a liquid and safe stock exchange. In truth, however, it is often only the exchanges themselves or groups of traders who play a game with the ignorant investors.
Stock market manipulation: Not only in the cryptosector
Although there are isolated cases of insider trading on regulated stock exchanges, but not to that extent, especially as most markets are significantly larger than the crypto market. For example, the trading volume for the EUR / USD currency pair is about $ 3 to $ 5 trillion daily. By contrast, the crypto market has a volume of just 10 to 20 billion US dollars. Moving small and unregulated exchanges to cover small markets is much easier than on highly liquid, capitalized and institutionalized exchanges. Especially since market power is distributed among many more players and is less centralized than in the crypto market.
Stock exchanges for bitcoin & Co. little transparent
In addition, transparency on regulated stock exchanges is significantly higher and capital is better allocated. For example, if major shareholders, insiders or board members of a listed company trade in the relevant stock, they must make them public. If they do not do so, they commit a serious crime. This deterrent effect does not exist in the bitcoin sector. Insider trading is not punishable. Nobody, if he pays his taxes, needs to be afraid of legal consequences. An invitation for those who do not let moral concerns stop them.
A market in the identification phase
Ultimately, however, stock exchanges, apart from the technical manipulation to be prevented, only form markets. Of course, some manipulation can be done through regulation and better standards. An illiquid market dominated by large players will always discriminate against small investors; a regulated and fair functioning stock exchange can not change that.
To improve the overall situation around Bitcoin, both are needed. Both more transparent and secure crypto exchanges and a more mature market. The latter, however, can hardly be actively influenced. While it will be possible to achieve higher stock market standards for central stock exchanges in several months, it will take a few years for the crypto market to mature.
If you are not one of the big fish with insider knowledge or special contacts, you should think twice about whether day trading in the crypto market is a good idea. Buying and letting go could not only be a sensible investment strategy for tax reasons.