We have become accustomed to hearing the fact that decentralized currencies are open to the public therefore offer more transparency and equal opportunities. However, it is very possible to manipulate and exploit the market to your own advantage and truth be told it is usually the rich that holds the strings.
According to Investopedia, “the act of artificially inflating or deflating the price of a security or otherwise influencing the behavior of the market for personal gain,” is known as market manipulation and it is very real! Investing in cryptos and blockchain technology is already risky business which s why it is imperative to understand how the crypto market can be used against us.
The key players or ‘whales’ as they are called are the ones which have the most amounts of any cryptocurrency and therefore present fake information to the gullible public in order to benefit from the manipulated market.
The presence of whales in some critic’s opinion is not all bad however as without their involvement or more importantly, their investment, there wouldn’t be a viable market to begin with.
Here are some of the key methods of market manipulation by these ‘whales’;
Wash Trades
This is when investors sells stocks and then immediately buys the very same ones to give the illusion of a productive and lucrative investment. This is where you trade with yourself, to pump the price up or down, or just create the illusion of trading volume.
Pump And Dumps
This is another favourite method for whales where they gradually collect a certain coin over time and as it’s popularity increases so does the amount of investors that jump for the opportunity so they don’t miss out or before prices increase. When the whale feels that they have made an adequate profit, they initiate the dumping process which is done a bit quicker than the initial accumulation.
However, it still fools the other investors for enough time so that the perpetrator gets away with a good profit, leaving everyone else high and dry.
Sell Walls
The last method we’re going to look into is the idea of a whale’s own sell walls which means that being well, rich, they will have some major inside information regarding positive or negative market news about a coin.
And since they will have access to this information before any one else, they can choose to either invest before prices surge or dump coins before catastrophe hits. The whale first creates a huge sell wall that brings other investors in for the bait. Once the gullible investors fall for the bait and the orders made by the whale are full, all they have to do is sit back, relax and wait for the inside info to become public.
