What do you think when a crypto price surges and falls almost immediately?
Only sometimes is it a result of regular market volatility.
Often market manipulators cause a sudden rise and fall in market prices to defraud you.
What Is Crypto Market Manipulation?
In crypto manipulation, bad actors create illusions to inflate or deflate the market prices to snatch up profits.
Market manipulation has caused a lot of harm to crypto investors and the crypto market at large.
Pump and Dump
Pump and dump is one of the most frequently used market manipulation strategies.
The price inflation creates noise and attracts people to buy the asset.
The bad actors then withdraw their funds sharply to make quick profits.
The withdrawal deflates the price sharply and leads to sudden losses for many that were deceived.
The major targets for pump and dump are cryptos with low trading volume.
Spoofing
Crypto whale spoofing involves manipulating the crypto market by initiating fake orders.
This method involves placing large buy or sell orders intended to be canceled.
This act is carried out to attract traders and help such an asset gain attention.
Wash traders need multiple accounts to carry out market manipulation.
They sell crypto with an account and buy it with another account.
Hence, wash traders trade with themselves.
Wash trading can help them boost trade volumes and earn more commissions.
Stop Hunting
Stop hunting is an attempt to force traders out of their trade positions.
The action can drag an asset below the price where traders have placed many stop-loss orders.
Bad actors initiate multiple sell orders to make a crypto price decline and hit the stops.
This results in high crypto volatility and gives the attackers a chance to buy at a lower price.
Stop hunting is a strategy financial institutions and market-makers use to make short-term profits.
Research and Multiple Consultations
Do your research before trading by confirming prices from different reliable sources.
Using multiple crypto exchanges, you might compare assets prices and data for relative relatedness.
Study Historical Trends
The trend, they say, is your friend.
Historical trends offer precision in trading as the data can be consistent and reliable.
Bad actors often prey on recent market trends but may find it difficult to distort historical trends.
Trading based on prevailing trends could help reduce the rate at which market manipulation affects pricesmanipulated trends dont last.
This is not to say this can make you totally immune to market manipulation.
However, it will put you in a better place than someone trading on impulse.
Use Trusted Exchanges and Coins
ensure totrade on trusted exchangesthat have a good reputation.
New exchanges and coins with less trade activity are usually susceptible to market manipulation.
Your portfolio should be a healthy mix of assets you have some faith in.
For example, we have mentioned that low market-cap coins are susceptible to manipulation.
Thus, if you must trade low-cap cryptos, combining them with high-market-cap cryptos could be a safer option.
In that case, we advise you to have another portfolio with exchanges with higher trade volumes.
The market is generally volatile, and a lot happens every minute.
So verify you always trade with a solid trading plan and implement various risk management strategies.
The crypto market is still young and widely unregulated.
Always conduct your own due diligence and consult a licensed financial adviser for investment advice.
