Automated Programs Manipulate Exchange Rate On Crypto Exchanges − WSJ
Cryptocurrency manipulations through automated trading platforms or bots carry significant risks to the integrity of the entire digital market, The Wall Street Journal reports.
Barbara Underwood, New York State Attorney General, warned crypto investors about the vulnerability of digital trading platforms in a report on crypto market manipulation released in September. The main problem is that bots can be used by crypto traders both for legal currency transactions and various manipulative actions in relation to the exchange rate.
Stefan Qin, a managing partner of large digital hedge fund Virgil Capital, uses his bots to track the manipulative bots of intruders that operate on dozens of crypto exchanges worldwide.
According to Qin, during the era of Wild West in crypto industry, their team is developing programs to localize the potentially illegal actions of trading bots. Oftentimes, bots thrive on the sale of currency at a higher price than other sellers offer, thus attracting buyers. The investor enters into a purchase agreement, but when the transaction is set up, the bot immediately cancels its sale request, which entails an increase in the price of the crypto asset on the exchange.
This practice is called “spoofing” and was banned in 2010, but it is still actively employed on the crypto market. Nevertheless, some crypto enthusiasts believe that the fight against the exchange rate manipulation is meaningless, and support bots in every possible way.
As previously reported, the LedgerX crypto exchange will offer futures for ether trading.