$1 Billion at stake: Crypto market manipulation

Organised Crypto trading groups manipulated the market to make a profit of $825 million in 2018.

Research into cryptocurrency markets performed by the Wall Street Journal suggest that there are numerous coordinated pump and dump schemes done by traders to inflate or crash the prices of various cryptocurrencies to their advantage.

The goal of such traders or ‘whales’ is to raise the coins price through sudden interest before selling it at a predetermined peak. The volatility of cryptocurrency enables such pump and dump schemers to portray give the impression of a coin gaining its price when in reality the value has been artificially manipulated. This results in massive inflammation in the price of the cryptocurrency coins with no underlying reason or announcements.

The WSJ looked at 175 schemes trading 121 different coins, stating many more such exits, “Potentially adding millions of 10 Million more in activity” adding that these “operate in private chat rooms, accessible only by invitation generally overseen by an anonymous moderator.”

An example of such manipulation the WSJ highlighted is CloakCoin. Coinmarketcap shows that the currency has exhibited cycles of boom-then-bust pricing, with little indication from the industry as reason for such change. The WSJ was able to connect to a massive pump in CLOAK with a Telegram group titled ‘Big pump signal messaging’ to buy the coin. Other popularly traded cryptocurrencies and altcoins listed on the very same exchange portrayed negligible price movements during that time-frame, thereby establishing the fact that CLOAK was acting independent of the prevailing crypto-market. 

This is just one of the many examples of market manipulation taking place in the Crypto world-leading investors at the mercy of market manipulators and the ever-present whales. 

The 3 major ways that these whales manipulate the cryptocurrency market in their favor are: Pump And Dumps, Sell Walls, Dark Pools

To conclude, the cryptocurrency market is still a young one, which means that there will be a lot of opportunities to make money including arbitrage and pump-and-dumps. Moreover, it also means that the market is much more susceptible to manipulation when compared to traditional markets. However, the future of such whales seems to be bleak as regulations from across the sphere start kicking in to reform the blockchain space as it is and encourage healthy investments from the public and government entities alike.

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