Manipulated cryptocurrencies

According to the WSJ (Wall Street Journal) reports, robots are manipulating the prices of digital assets on cryptocurrency exchanges.

Automated Trading Softwares

These are programs that allow users to set certain rules for both trade exits and entries, as well as submit orders to a market exchange or center. These softwares also allow traders to execute orders automatically through computers that are faster than any human alive. These trading programs have been made available for both the traditional financial markets as well as the crypto market and they can be deployed or used for both manipulative and legitimate strategies.

While addressing the activities of crypto markets, the Wall Street Journal cited a lack of proper regulation of the crypto market as the main reason or condition that allows these automated programs or bots to carry out abusive market strategies on an industry level. One of the presidents of a crypto-based start-up CoinList Andy Bromberg while speaking to reporters from the WSJ, stated that this act of using robots to influence the price of digital assets is rampant in the market at the moment. Bromberg went further to state that

“This activity hurts not just individual and institutional investors, but the reputation of the market as well”.

Market Manipulation Examples

According to the report, about $80 million worth hedge fund start-up Virgil Capital makes use of automated programs or robots on a number of cryptocurrency exchanges. While speaking to newsmen, Stefan Quin, the managing partner of this hedge fund start-up stated that he is constantly in a cat-and-mouse battle with enemy programs or robots.

Earlier this year, it was reported by the WSJ, that Virgil Capital lost a reasonable amount of funds on certain Ethereum (ETHER) trades after they were harassed by an enemy robot. The report went further to discuss the strategy that was used by this enemy robot. According to the report, the strategy of the robot was similar to what is called “spoofing”. Which literally means a practice where traders enter fake orders only for them to cancel them. This strategy used by this robot is aimed at tricking other traders or investors to either buy or sell an asset by falsely informing them that there is more supply or demand. This practice was outlawed by the United States Stock and Future Markets.

WSJ went further to cite another example of digital price manipulation. This example is that of crypto trader Kjeitil Eilertsen (who actually began trading Bitcoin in 2011) who developed a program called “Quatloo Trader”. At that time, it was hyped as one of the best manipulation programs in the crypto market. The main idea behind this program was to make the manipulation of the market a whole lot easier by making use of certain inbuilt tools like special tabs that are capable of executing various abusive strategies. While speaking to newsmen, Eilertsen stated that it was not right to ban market manipulation as people have become dedicated to it.

Just last week, over $90 million in illicit funds were channeled through various cryptocurrency exchanges Shapeshift being one of them.

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Nicolas Alexander is an Engineer by training and a huge fan of technology in general. An ardent follower of developments in the blockchain industry. Nicolas has been writing in the crypto space for the last 5 years and has participated in the content development of some of the biggest blockchain projects around the world. Currently Nicolas serves as the community outreach manager as well as marketing head.


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