What is the Manipulation in the Cryptocurrency Market and How are They Arranged?
What is the manipulation of the cryptocurrency market? Who and how affects the price of coins? And how to be an ordinary investor in this situation?
Manipulation of the coin rate is an artificial impact on it by a certain group of people (manipulators). Their main goal is to purchase the asset at the lowest possible price, and then to sell it on the highest possible price. The same goal is pursued by speculators, but there is one important difference between them and manipulators: the manipulators can independently set the prices of the asset, and the speculators can only predict it.
Who are these manipulators? Often, these are organizations (funds) that have at their disposal significant amounts of money. Less often, single major investors or media people who have the opportunity to spread information really quickly.
Rise in prices caused by manipulative actions is quite rare in a naturally growing market. It almost never occurs when the value of the asset has passed the average values, because the main purpose of the manipulators is to purchase the asset at the lowest prices, so they should be expected to appear under the following conditions:
- This is a new coin, which was often (positively) spoken lately;
Ordinary users don't know what to expect from new coins, and the growth of popular coins looks ordinary (the price of unpopular assets is low, which allows manipulators to influence their rate with fewer funds);
- The price of the coin is underestimated (for example, after a certain period with a bad news background or after a decline of the price);
During the global downtrend in the market, in this case, the manipulators take on any coin, which before the fall was popular.
Often, manipulators are interested in assets with a small price. When choosing a coin, manipulators will rather choose one that costs $10, rather than $100 or more. The reason and mechanism of this action are extremely simple.
Manipulators give the first impulse, which encourages ordinary users to increase this "snowball." Unprofessional investors seeing that the rate is growing, start buying up a coin, thereby attracting all new customers. Meanwhile, the asset continues to grow, and that's exactly what manipulators need. One of the most important tasks of manipulators is to attract new investors-beginners, who are more willing to come to the cheap market. First, the increase in the price of cheap cryptocurrency seems more natural, and secondly, purely psychologically, for many people it seems that $5 per coin is more promising than $100.
Which tricks manipulators use to increase the prices?
There are several methods of direct influence on the price of a certain asset, in this article we will describe the most common ones.
- One-time investment
Manipulators buy up the large amount of asset, which naturally causes a rapid rise in its price. More clever manipulators gradually swing the market, so that from the outside their influence was as inconspicuous as possible. After the rate reaches its maximum, the manipulator sells all previously purchased assets. This strategy is feasible if the manipulator has enough funds (20-40% of the coin's capitalization). After the initial impulse, which was caused artificially, usually, growth continues for another 1-3 months, while the price can jump 2-5 times.
- Partial investment
According to this strategy, manipulators buy up the asset for a long period of time. With this approach they create the appearance of stability and reliability. At first, the increase in the price of a coin is provided solely by the actions of manipulators. At the same time, some of them support the asset even in a falling market. After some time, the market overheats, reaching its peak. At this time, the manipulator abruptly gets rid of its coins. In order to implement this strategy, it is necessary to have from 5% to 20% of the total capitalization of the coin. Big infusions aren't necessary, the main thing is to do everything correctly and slowly and then the coin will grow in price 2-5 times.
- Use of robots
This strategy is very similar to the first, but at the same time differs from it in some nuances. First, the manipulator totally relate on bots here, while in the first they are only an auxiliary tool. Second, it is shorter in terms of time, as the market will be able to track the massive use of bots fairly quickly. Therefore, all lasts no more than two weeks. Third, infusions aren't necessary, since the strategy itself is short-lived. Well, in general, all the same, manipulators artificially create an increased demand for the asset, attract newcomers, which causes the growth rate. After that, the bots exit the game, and when the price reaches a maximum, the manipulator sells out all of its coins. If we are talking about the TOP-20 coins, then they can be increased by no more than 20%, but unpopular and by as much as 200%.
- Increase in trading volume
In this case, several large market players are colluding and begin to sell and buy from each other a large number of coins. This is noticed by traders and investors and the rate begins to grow, until the manipulators have discarded their assets. To successfully implement this strategy, you need less money than to implement all of the above. The main task is for the market to notice an increased volume of trades. Often, this manipulation doesn't last more than two weeks and can increase the coin rate by 30-80%.
- Going to a new price range
The manipulator buys a certain number of coins, which will be enough for the price to reach a new psychological mark. For example, if the price of the coin was $50, then its next psychological barrier would be $100, if $7000, then $10,000, etc. When this barrier is reached, investors begin to believe that such a price is real and begin to buy up a coin, in the hope that the rate will reach a new range. As a result, by common efforts (and manipulators and investors) the rate still approaches a new level. But already at this point the manipulator sells its assets.
There are less common and more tricky manipulations. One of them can be considered artificial creation of a good news background. At this time, the manipulator starts rumors, pays for fake articles, creates fake pages of famous people in the industry, etc.
How can an ordinary investor protect himself from such manipulations?
And now we have reached the most interesting and most important part of our article. Here we will try to give you a detailed answer, how not to be guided by market manipulation and save your assets.
Everybody should understand that the last stage of market manipulation is the fall in the price. This happens for two reasons:
- The manipulator deliberately drops the price to re-purchase at the bottom;
- The manipulator sells a large amount of the asset at the peak.
The first option involves repeating the cycle, since the manipulator will have to sell the asset once again. For this reason, all the activities of the manipulator will be aimed at preventing the withdrawal of investors, so it will again raise the rate.
The second scenario implies that the manipulator has already got what they needed from this asset and he doesn't care what happens to it. This provokes a strong decline in the rate.
It should be understood that if we are talking about a large cryptocurrency with a large capitalization, then the average price level, usually, occurs in the course of several months. If we are talking about little-known coins, then there is no guarantee that its price will ever go up after this. The average price level is the rate that was on the eve of the manipulation. Due to the fact that during the manipulation the psychological mark was broken, the market should sooner or later return to it. Often this happens in a year or two. It should be noted that if the price of a coin returns to its peak in a couple of months, then most likely for this aren't entirely natural causes.
What to do in such situations and how to protect yourself from manipulation in the market?
- It is necessary to have a skeptical approach to jumps of the price, which don't have a fundamental support. If there is no natural adequate reason, then with 99% of the likelihood it is manipulation.
- You don't need to invest in long-term in a rapidly growing market. Everyone can earn on manipulations if you go for a short time. We need to closely monitor the dynamics of the price asset and sell until the manipulator hasn't sold his assets.
- Invest only at the very beginning of rapid growth, let's say if it started 2-3 days ago, then an ordinary investor has all the chances to earn, but if the course is inexorably going up about a month, then most likely the peak is already around the corner.
- Turn off greed and don't hesitate with selling the asset. If the coin has grown 2 or more times more, then it is better to get rid of it, rather than wait for the weather to come from the sea. Otherwise, you can lose it all.
- As benchmarks use psychological marks. It is necessary monitor the dynamics of the market, especially when the rate reaches the big numbers and doesn't hesitate to sell at the slightest hint of a trend reversal.
- In this market, it is better not to use bots, not to trade with other people's money, especially not to use margin trading.
- Carefully follow the growth rate, look at the deals. If they are template, this means that the bot is working, which "pumps" the market.
- Think critically, always recheck information, especially positive news background. It is important to monitor the official pages of coins.
And perhaps most importantly, if you see manipulation, then go into battle only if you are confident in your capabilities. If in your head you are not sure, then with a high degree of probability the game with the manipulator will end not in your favor. In this case, it's better to sell your assets on time, before it's too late.