Cryptocurrency Price Manipulation & How It Is Done

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Cryptocurrency headlines have been the talk of the financial world since December of last year when Bitcoin’s price surged to an all-time high of over $20,000. Since then the price has come crashing down, reaching a paltry $6,000 at one point.

Still, the price drop would have still garnered an 800% return for those who began investing in Bitcoin in the beginning of 2017, meaning that the “Coin Rush” hardly seems to be over.

While regulatory policies in Asia and talks of more regulation governing the world of cryptocurrencies continue to rise across the globe (one of the main factors that has led to digital currency’s recent slide), these regulations are now seen by long-term investors as a sign of future health as regulatory policies will give more infrastructure to the markets and improve security for cryptocurrency transactions.
https://www.forbes.com/sites/laurashin/2018/02/13/forbes-fintech-50-2018-the-future-of-blockchain-and-crypto/#432027501036

However, price manipulation within the digital coin markets is something that investors feel is unavoidable, at least for the time being, and so this factor must be included when determining the future value of each coin, as well as the digital currency market as a whole.

Manipulation Unavoidable

According to CNBC, the leading cryptocurrency firms like NEM feel that while the price manipulations within the digital coin markets are difficult to gauge much less control, they do not see them as going on forever.

In fact, Lou Wong, the current President of NEM, has stated that all financial markets experience some form of price manipulation during their life and so the digital currency world is no different. Being that it is still in its infancy, price manipulation is unavoidable but with the passing of time, tighter regulations and stronger governing bodies these activities will at the very least desist to a minimum.
https://www.cnbc.com/2018/02/13/cryptocurrency-price-manipulation-is-unavoidable-nem-president-says.html

How Price Manipulation Works

Many traders and small-time investors blame the big Whales for manipulating the price of Bitcoin and other heavily traded cryptocurrencies like Ripple and Ethereum, but it is actually “bots” that have been the main cause for any artificial upswings of Bitcoin and its counterparts in the recent past.

The current cryptocurrency market cap equates to roughly $440 billion (at the time of this writing), yet that number does not indicate how much of this $40 billion is changing hands due to individual investor trading or automated machine trading, an important factor to determine as bot trading affects the actual stats of each trade.

It is extremely difficult to measure just how much of last year’s price inflation for digital currencies were due to “bot trades” but it is sure that they have played a key role in increasing the overall price of the coin markets in the past and probably will continue to do so for some time.

Basically, trading bots manipulate short-term holdings by mechanically inflating prices, which end up causing investors to pay a slight premium during each trade. Considering how much trading is done on a day to day basis within the cryptocurrency markets, all these “artificial premium hikes” end up causing a major rise in value for the market as a whole.

While in the short-term this may seem like a boon for investors, as the price will continue to spike on every trade, like all financial bubbles that are supported by fluff and not tangible facts, they burst and come crashing down as is evident of the current “crypt-crash”.

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