The cryptocurrency space often reminds me of the wild wild west. You constantly need to watch out if you don`t want to get rekt. I have already provided you my Ultimate Guide To Avoid Crypto Scams.

The thing is that there are not only scammers out there. There are also other dark forces out there like market manipulators trying to steal your hard-earned Satoshis, and this is exactly what this post is about.

I am Cryptonator`s and my job is to keep you safe in the crypto space. Let me show you how to spot market manipulation in order to protect your wealth. Just make sure to read it till the end.

The General Problem

While other markets like the stock markets are regulated, the crypto markets are still unregulated and mostly anonymous. You simply have no idea who is behind large sell pressure on a certain coin. It is nearly impossible to identify who is behind it.

Well, cryptocurrency is all about financial freedom and avoiding traditional banks. So the fact, that cryptocurrency is unregulated and anonymous isn`t only a bad thing, even if it makes market manipulation much easier. 

Order Book Spoofing

One technique that market manipulators are using is called order book spoofing. Order book spoofing is a technique of market manipulation where a whale will place a large set of orders but he has absolutely no intention that these orders ever get executed. Whales have very well adopted this technique and it has happened massively during the 2017 bull run. 

So what these guys are basically doing is building up a huge sell or buy wall on the order books of a certain exchange. Other market participants see these walls and tend to react to them. let`s suppose that you have spotted a large sell wall on your exchange. Will you buy that coin when you doubt that this coin manages to break this sell wall? Well, most of the certain not. In the background, the whale starts to accumulate more and more of these coins until they have accumulated enough. The market has been fooled and all the selling orders disappear from one moment to the other.

The same can also happen the other way around with massive buy walls. If you spot one of these, it makes you think that there is a lot of support for this coin. This makes the other market participants bullish on that coin. once, enough market participants have been fooled, the buy wall vanishes into thin air.

Wash Trading

There is also a technique called wash trading similar to order book spoofing. With the help of this technique, market manipulators can create the perception that there is an active market for a certain asset while in reality there is nearly nothing going on. It is happening again and again in crypto space that the same asset gets simultaneously bought and sold by just one individual or a group of insiders. The goal of the market manipulators is to create the illusion of a high trading volume. The reason is that traders prefer to trade assets with high liquidity. Experts believe that the majority of the trading volume of exchanges is just fake. That`s why the trading volume itself is unreliable for the valuation of cryptocurrency exchanges.

When Bitwise Asset Management submitted its Bitcoin ETF proposal to the SEC last year, it included a study showing that 95% of trading volumes on cryptocurrency exchanges were counterfeit. Bitwise reached this conclusion after analyzing 81 exchanges over four days in March. Shocking statistics like these show that the actual market for Bitcoin and other cryptocurrencies is much smaller than it appears. 

For the regular investor, it is very hard to spot wash trading. So what can you do to avoid it? Well, you can use a reputable exchange like Binance and not some unknown, obscure exchanges from overseas. You can also try to spot a uniform pattern of buy and sell orders

Stop Loss Hunting

Whales can also go for a so-called stop-loss hunting. With this technique, whales can force other market participants out of their positions by driving the value of an asset so low that they FOMO out and sell. Now the whale has reached its goal and can get the asset at a much lower price. Now with the whale buying all the dips, the market recovers, and the other participants realize that they have been fooled.

It is extremely tricky to avoid becoming a victim of a whale`s stop-loss hunting. The best advice here is probably just to be cool and not to FOMO. Another practical thing that you can do is placing stop-limit orders with an execution price higher than the trigger price. In this way, you can still protect your funds against downside risks.

Pump & Dump

Most of you have already heard about the pump and dump scheme. The name of this technique already speaks for itself. Insiders are trying to pump the value of a certain coin until it starts gaining more and more attention. As soon as other traders start to FOMO in, the group of insiders dumps the coins on them with a decent profit. This is relatively easy to do with altcoins that are having low liquidity. You don`t really need a lot of capital to pump these altcoins with a low market capitalization.

Mostly, the pumps and dumps are very well organized and coordinated by these insider groups. Even cryptocurrency exchanges have been involved in these actions. It can be hard to spot when the pump and dump starts but there are some indicators to watch out for.

First of all, these pump and dumps tend to happen with low market cap altcoins. It can also happen with high market cap altcoins but that`s an absolute exception. Another indicator is the number of exchanges that are listing the coin. If the only exchange is Coinsbit, then consider it a red flag. If it is listed only on one exchange then the market manipulators have a greater impact on the price. The other thing is that the potential victims have to come to this one and only exchange to buy the coins from the market manipulators.

If it is listed on different exchanges, then you should consider it as a red flag when there is a lot of movement in price and volume on just one of these exchanges while on the others, there is zero action. It is probably a coordinated action and not driven by the markets.

In the end, the most obvious indicator of a pump and dump is the price. The market manipulators want to pump the price to give their potential victims some serious FOMO until they are jumping in. If you see an altcoin pumping like crazy but you have absolutely no idea why then simply don`t FOMO in and don`t buy it.

Spreading FUD

Another effective and often used method to manipulate the market is spreading FUD.

"FUD refers to fear, uncertainty, and doubt. It refers to the movement to influence the perception of certain cryptocurrencies or the cryptocurrency market in general by spreading negative, misleading, or false information. FUD is not unique to the cryptocurrency markets - it exists in traditional markets as well where unscrupulous players release negative or false news to drive fear and uncertainty in the market in order to profit from it."

That`s exactly the definition of FUD, taken from the CoinGecko Glossary. The benefit of FUD for the market manipulators is that they actually don`t have to buy or sell anything.

Spotting this fake information can be quite difficult. In the end, it all comes down to your own judgment and decision. The difficulty here is that you can`t just dismiss all the FUD because sometimes it is legitimate. To detect FUD, you may ask yourself if the source is reliable, or is it from well-known trolls? Then it all comes down to your own research and your own conclusion.

My Final Thoughts

As you see, there are many different ways to manipulate the markets. These market manipulators are like scammers trying to steal your hard-earned Satoshis. Knowing and understanding their methods is the best way to protect yourself.

So I hope that I could provide you with some interesting and useful information about market manipulation techniques. If that`s the kind of stuff that you like to read here on Publish0x, make sure to follow me and get my posts when they are fresh. 

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