The Method To Prevent Cryptocurrency Market Manipulation

Introduction

Cryptocurrency is just like a beautiful woman in which we intend to marry and upon marriage we noticed that this person or woman has some certain negative attributes or traits, but her positive attributes and traits is just sufficient enough that it covers the negative and we still go on to marry her regardless.

Link

In the same way too, cryptocurrency offers a lot of advantages and benefits enough that even though it is prone to certain disadvantages and challenges like volatility and market manipulation, we as individuals and businesses are still going to participate in the cryptocurrency market.

However, is there hope for a change, well join me as I would be considering and exploring certain or some of the significant methods in which market manipulation especially, can be prevented and combated in the cryptocurrency market space.

• Regulatory Oversight

Cryptocurrency market manipulation has successfully gone on for so long owing to the nature and structure of the cryptocurrency ecosystem, cryptocurrency operates on blockchain technology and as such it is decentralized this means that it is not governed by a single entity.

This feature of the decentralization makes it hard for the government and regulatory bodies to set or place a clear guideline on how transactions on the cryptocurrency market should be carried out because before such guidelines is enforced there has to be a consensus or agreement between all the distributed nodes in the network.

However if the government and regulatory bodies are able to successfuly set clear and rigid guidelines on how the cryptocurrency market should operate, they would be able to manage the volatility of the market and keep watch for anyone who tries to manipulate the cryptocurrency market and melt out the proper consequences.

• Improving Market Transparency

They are certain kinds of market manipulation that includes wash trading and spoofing now, wash trading is basically when a trader simultaneously buys and sells a particular cryptocurrency for the purpose of creating a false history of high demand so as to mislead other investors or traders on the real market demand or supply of the particular cryptocurrency.

Link

Spoofing too, is basically when a trader places a very high buy or sell order which he or she does not intend to actually execute but rather cancels this order at the last minute, this trader does this in order to cause an increase in the price of the cryptocurrency and then quickly makes profit from these manipulated changes in price.

Therefore, if we want to mitigate these forms of market manipulation, it is important that we improve and increase the transparency of the cryptocurrency platforms, so that they should start making public order books, transaction history and trading volumes so that these traders and investors who tend to manipulate the market will no longer enjoy privacy, in their malicious activities.

• Making Use Of Decentralized Exchanges

They are also order forms of market manipulation like insider trading and front running, insider trading is when a trader enters a trading position based on some tip or information he receives which was not made known to the rest of the public as a result getting an unfair advantage in the market.

Another form of market manipulation is front running, front running is basically when a broker or employee who is aware of a or some large scale transactions about to take place in the cryptocurrency market through the exchange platform he works for now takes advantage and leverages this knowledge by making a trade either buy or sell so as to make profits for himself.

Therefore to mitigate these forms of cryptocurrency market manipulation we can implement decentralized exchanges platforms, this platform because of their decentralized nature makes it that no one person is in any position to get or leverage any information that is not already available to the public hence limiting manipulation of the cryptocurrency market.

• Setting Proper Liquidity And Stability Measures

Link

One method of preventing cryptocurrency market manipulation is to ensure and put in place certain protocols and measures that continues to maintain and manage liquidity in the cryptocurrency market because the lower the liquidity is in the market the higher the market is prone to manipulation by little or low scale transactions.

Measures to implement, so as to manage liquidity can be in the form of adopting market makers or attract businesses and institutions to take part in cryptocurrency transactions, this can prevent any outside influence from any trader who tends to involve himself in manipulating the cryptocurrency market.

Additionally there is something known as circuit breakers these are mechanisms that help to discontinue or totally pause any trading activities or actions for a time whenever there is sudden change in price of the cryptocurrency market this ensures that the incentive to manipulate cryptocurrency market is renoved, seeing as absolutely nobody will profit if trading activities are paused.

Conclusion

I would like to thank you all for taking the timeband effort to go through this post which I have made, and I hope that you have been able to learn a few things for example, like some of the methods cryptocurrency developers can take to ensure that the market is not all that susceptible to influence or manipulation.

Some of these methods as explained in the paragraphs above include the following; setting measures to ensure liquidity and stability of the market, improving transparency, increasing regulatory oversight and finally the last but not the least making use of decentralized exchanges.