Contents of this article:
The rate of cryptocurrency is formed by supply and demand, and manipulators take advantage of this. The crypto industry is ideal for manipulation, because the market reacts sharply to them, and manipulators manage to make good money. Let’s talk about the most common manipulations and how to avoid them.
Who manipulates the cryptocurrency market?
Manipulation in the cryptocurrency market is a deliberate action aimed at artificially inflating or understating the price of a digital asset for profit. Depending on the goals of the manipulation, the cryptocurrency exchange rate can grow or fall significantly in just a few hours. If the manipulator plans to buy more crypto, he will work to lower its rate, and vice versa.
Large traders manipulate on the crypto market . For manipulation, they team up with each other, manipulate in collusion with exchanges, cryptocurrency developers or the media. Sometimes the exchange itself is behind the manipulations.
Common manipulations
Consider several popular ways to artificially change the rate of the crypt, which are used by manipulators. One of the most common types is pump and dump. By launching fake news about the imminent growth of the coin rate, large market players create an artificial hype around it, and traders begin to actively buy crypto. The initiators of a pump (inflating the rate) pre-purchase an asset at a low price, and when the rate for it reaches a peak, they sell it – this is called a dump. Usually, after the organizers dump a large number of coins at an inflated rate, the price of the asset returns to its previous level or falls below what it was before the pump and dump. Experienced traders who notice the pump right away can join the scheme and also try to earn money, while beginners should not get involved in the game.
Wash trading . Another way to create artificial excitement around the crypt. The initiators create a large number of orders to buy a particular coin, creating the illusion of active trading in it. Traders, noticing interest in the asset, rush to buy it. Unlike pump and dump wash trading suitable for exchanges with low trading activity, as such schemes are less noticeable on popular and popular platforms.
Cross trading is a manipulation scheme in which transactions are actually carried out but not listed on the exchange. As a result, transactions are carried out, but they do not affect the cost of selling cryptocurrency . Such manipulation is possible only if the exchange itself acts in collusion with major market players and allows cross- trading .
What should a trader do to avoid becoming a victim of manipulators?
are no tools that would 100% prevent manipulations in the cryptocurrency market . The task of a trader who does not want to become a victim of manipulation and lose part of the funds is to monitor the trains and the state of the market, not to take impulsive actions, to consciously open each transaction, having calculated the possible risks in advance.
What will help to avoid manipulation:
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Long-term investment strategies. Market manipulation is almost always directed at traders who choose to trade short-term. If you are just starting to dive into the crypto industry , stick to the strategy of buying and holding crypto, do not rush to start active trading right away.
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Monitoring the ratio of short and long positions. If you still prefer to actively trade cryptocurrency , you can protect your assets and yourself from manipulation by carefully monitoring the trading. If the ratio between short and long positions is higher than usual, a pump is likely.
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Diversification. Don’t focus on one asset. To reduce risks, you need to invest in different coins, preferably with high, medium and small capitalization. By balancing your investment portfolio, you significantly reduce the risk of losing funds in the event of a sharp drop in the exchange rate of any asset.
The best way to avoid manipulation is to learn to recognize it in time. Take a trading course at Crypto Crew , learn crypto exchange trading skills and invest safely! We will teach you how to analyze the state of the market and recognize trends, as well as correctly respond to the actions of manipulators.
Author: admin_cryptocrew
