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A trader can become a victim of manipulation playing in the cryptocurrency market. The actions of manipulators lead to the fact that the rate of the crypt grows or falls depending on the goals. The awareness and education of traders grows as the industry develops; it becomes more difficult to manipulate. Beginners, who have not yet figured out such intricacies of the cryptocurrency markets, can suffer.
We will tell you who and how manipulates the cryptocurrency market, and how not to fall for tricks.
Types of manipulations in the cryptocurrency market
Pump and dump
It is a situation when a broker, who has already opened a position in a cryptocurrency, tries to increase its price. He can buy a large amount of the available asset and cause false demand. Another way to raise the price is by powerful people or groups of people. They try to convince traders that a particular coin is more valuable, increasing the demand for it. Elon Musk is one of these manipulators; his tweets repeatedly raised and collapsed the quotes of some coins.
It is the opening of a large number of applications for the purchase and sale of cryptocurrency which create a false impression of market activity. Such actions attract new traders and motivate them to buy those assets which would not normally attract such high attention. Such manipulation is often found on exchanges with low trading activity.
Crypto whale is a market participant, who owns so much crypto that when he sells it, the market is almost guaranteed to change. Whale games or manipulation in the cryptocurrency market can create a bearish trend causing investors to sell assets in a panic.
The whales delete applications and buy crypto at a reduced price having achieved their goal.
How is manipulation prevented?Experienced players and institutional subjects know how the cryptocurrency market is being manipulated; the latter are working to increase the legitimacy of the entire industry. Development of the market and the appropriate technologies that prevent fraud, reduce the risks for investors and traders. Nasdaq which owns the exchange of the same name, for example, uses several solutions to combat manipulation.
Nasdaq monitors the behavior of the players closely and analyzes any abuse in the market. The platform has the Nasdaq Marketplace service, thanks to which, exchanges can operate in the cloud.
The company is making efforts to optimize trading operations, combat bots and improve the reliability of its exchanges.
Not only platforms, working with crypto, are trying to track the actions of scammers, but also analytical companies, for example, Whale Alert. The agency monitors millions of transactions per day in real time, and provides data to help traders analyze trends and avoid mistakes.
How to protect yourself from manipulations in the cryptocurrency market?
Trading on the crypto market is associated with high risks. It is worthwhile to think over an action strategy in advance and adhere to the principles of risk management in order to avoid them and preserve the investment portfolio.
As a rule, the main manipulations in the cryptocurrency market are aimed at traders, who perform short-term actions.
The following rules will help to protect your capital from risks:
- Diversify your investment portfolio. Do not invest all your money in one coin, invest in different assets. It will only be part of the asset even if one of your coins is negatively affected by market manipulation.
- Choose reliable exchanges. Trade on reputable and popular sites with a good reputation. New exchanges with low commercial activity are more prone to manipulators.
- Be based on historical price trends more than on current large transactions in the market making a decision.
The Crypto Crew team will help you to recognize the main signs of a manipulator in the cryptocurrency market. We train novice traders and investors to earn on digital assets profitably and safely. The training course, created by professionals, will provide maximum useful and necessary knowledge, help you to understand the psychology of market participants and prepare for trading on the stock exchange.