Let’s Talk About Market Manipulation. Today’s news about Binance getting a notice that they are being sued by the US Securities and Exchange commission caused a massive rift in the price of just about every asset in the cryptocurrency space. Now, we all know, especially if you have been around the cryptocurrency space for any given amount of time, that Binance doesn’t have clean white hands. They have been accused of wash trading and other market manipulation tactics in the past, and it’s know secret that CZ can basically manipulate the entire market at will as Binance is the largest crypto exchange on the planet.
In these instances, it seems to be a coordinated attack on the market to drive prices down to hurt the image of the crypto markets even more, or it was insider trading slamming in short trades on their way off the sinking Binance ship. But that is my paranoid speculation…So let’s get off of my opinions and talk about what market manipulation is…
Let’s Talk About Market Manipulation
Market manipulation is when people try to control the market for their own benefit. You see it in all kind of different forms. Big players do things to make prices go up or down artificially, tricking other traders. One common tactic is called “pump and dump,” where manipulators spread good news about a cryptocurrency to make people buy it and raise the price. Then they sell their own coins or stock and the price crashes, causing others to lose money. Another tactic is “wash trading,” where manipulators create fake trades to make it look like there’s a lot of activity, fooling others into thinking it’s a popular asset.
Those who are doing the manipulating may also use a method called “spoofing,” where they put big orders to buy or sell a stock or cryptocurrency but cancel them before they go through. This makes it seem like there’s more demand or supply than there actually is, affecting the price.
Lastly, “insider trading” happens when people trade based on secret information they have. For example, if they know about a big partnership before it’s announced, they can buy or sell coins to make a profit when the news becomes public. This gives them an unfair advantage over regular traders.
My personal opinion is that insiders at Binance got the word and started hitting the sell button to hedge their bets knowing the new about the SEC’s allegations. But hey, that’s just my opinion man. Nothing else than some good ole gossip speculation.
Using Algorithm Bots Against Manual Traders
In today’s world of bot trading, one thing that happens is that the price of a major asset, in this case Bitcoin can be manipulated, and because the crypto markets are so tightly correlated with the movements of BTC, then the algorithm ran bots basically all follow suit and start crashing every asset they are running, causing a chain effect in the markets. This is why, at least in my humbled, but loud opinion, when the price of Bitcoin or Ethereum drop, the rest of the market tanks with it.
As traders we have to learn to adapt to these kind of market conditions. You have to learn when to cut losing trades and switch gears to trade with the current trend, if you are able. These kind of times can produce some amazing buy opportunities if you know what to look for. You want to make sure the price has bottomed and is on the way back up before jumping in, because you certainly don’t want to catch a falling knife. As retail traders, we don’t have the money to move the markets, so we need to just learn to ride the waves.
Looking at Other Markets To Trade
You may have to think about adding in another asset class into your trading mix that can hedge your bets in these kind of times. So when the crypto markets are looking scary, you can still find opportunity in other markets. It all depends on your strategy of course.
As it is good to focus on one market and get good trading it when you are getting started, these are reasons, especially if you are playing in the cryptocurrency markets, to look at another stock industry or even a commodity like gold or oil to trade when your other markets are seeming a bit suppressed.
Long story short, there can be manipulation in all markets so it’s up to you to make the best decision for your business, because remember, that’s what we are doing here… We are building a world class business, we are not gambling! So be smart and savvy with your money and make all your trades count!
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Disclaimer: The information in this trade journal is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.