Understanding Market Manipulation in Cryptocurrency Part — 2


In our previous article, we covered the different types of market manipulation tactics that are corrupting the world of cryptocurrency. Today, we’ll be talking about how it affects the whole crypto market and the different ways with which you can avoid becoming a victim of market manipulation. Let’s dive in.

How Market Manipulation Affects the Crypto Market

Market manipulation is known to enhance dynamicity in the crypto market, resulting in a projection of utter chaos and a not-so-safe territory for beginner and completely new investors. Its ramifications can have an irreversible effect on the whole industry. This is because if crypto market manipulation keeps on affecting the ecosystem, sooner or later people will start losing faith. Furthermore, legislative bodies and the governments of different nations will keep on disrupting the sector.

Keeping a close eye on market manipulation is easier said than done. It’s a never-ending game of hide and seek. It’s always recommended to do thorough research before investing even a small amount of money in any crypto asset. You can refer to the basic strategies listed below to safeguard your holdings from market manipulation:

  • Cross-check with different sources

As a responsible crypto investor, it’s up to you to not rely on a single source of information to check an asset’s movements and trends. It’s advisable to cross-check and compare your asset’s data with other sources.

  • Check historical price trends

Manipulators tend to increase volume by pulling wash trades on various exchanges. It’s often seen that they post a huge trade on a known and popular crypto exchange platform while they do the exact opposite on a smaller, lesser-known exchange. Smart traders can avoid this sleazy scheme by referring to the historical price trends instead of abrupt, recent movements.

  • Longer-term contracts vs perpetual futures

The whales can work in a different way as opposed to the one mentioned above. Over here, they can at times plummet prices to liquidate their shorts and take advantage of a long position of equal size. To avoid this biased technique, it’s recommended to always check the premium on longer-term contracts with perpetual futures.

market manipulation always has been a factor affecting good blockchains
Courtesy: Youtube thumbnail
  • Diversify your portfolio

It goes without saying that your crypto portfolio must be a perfect blend of different coins and assets that fit your risk appetite. If your portfolio is correctly diversified, the sleazy market manipulation tactics won’t affect your assets a lot.

  • Don’t be a victim of FOMO

Keeping yourself updated on the latest news and trends in the crypto space is critical, but an overload in information can backfire. This is especially correct when the market is observing a downturn, in which you are more prone to get swarmed by your instincts and make some bad decisions. As a general rule of thumb, it’s important to know that literally no one in this world, no matter how intelligent they may seem, can predict what’s about to happen in the future, and no single source’s advice and recommendation is better than doing your analyses, research and arriving at your first-hand conclusions.

  • Only trade within your means

Regardless of how confident and fortunate, you are in a certain digital asset; you should avoid investing more than you can afford to lose. Always stick to your risk appetite because the last thing any trader would want is to get caught by emotions and wait for the price of that asset to go up only to find out later that it further decreases in value. It’s any day better to generate small gains than big losses. That’s trading 101.

Closing Note

Cryptocurrency investing just like any other form of trading is bound to be risky at all times. Thankfully, as more laws and regulations are being imposed, it’s safe to say that market manipulation will become harder than ever to pull off. It’s only a matter of time when we get to see the whales and manipulators scratching their heads to come up with new shady tactics. While only a handful of traders and investors are aware of how the market manipulators work, it’s important for every trader, pro or newbie, to know how they can drastically affect their crypto portfolios.