Cryptocurrency promised the world a decentralized financial system which was focused on the welfare of the society. It all started with the invention of Bitcoin, which peaked the popularity charts with its phenomenal price rise towards the end of 2017. Cryptocurrency is projected to be one of the better and more efficient systems of finances since its aided by the technology. However, being on the trade market it faces similar issues like trade washing, market manipulation by whales as the traditional ones.
So, can the technology come to the rescue of cryptocurrencies to avoid traditional problems like manipulation of the market by whales? We will try to find out what measures could be taken to avoid such problems and make cryptocurrencies a more formidable and preferred option of investment.
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How Whales Manipulate The Market?
In trade market terms, whales are big players with enough resources to buy a large portion of a certain stock when the prices are low and dump the bought stock or cryptocurrencies when prices start to climb up. The large pump and dump games affect the market severely and the effect is even more in case of cryptocurrencies as the market is comparatively small.
The cryptocurrency trade market is heavily governed by media buzz and PR stunts thus, the whales can manipulate the crypto market more easily than the traditional ones. In traditional ones, the market is centralized and stocks of a particular company are largely traded on a single platform, thus it takes more work and resources to pull off a manipulation when compared to the crypto trade market.
The most common cases of manipulation occur during an upgrade event like a hard-fork when most of the community are uncertain of the outcome. Whales use the vulnerability of the event to their benefit, as people start to sell their digital assets at a hurry and prices are on the lower side. Whales jump in and buy huge amounts of low valued tokens, and when the fork commences, and prices start to climb, they dump it in the market to neutralize the gains.
One of the recent cases of whale manipulating the market came last year during the infamous hard-fork of the Bitcoin Cash network. The Craig Wright led side used the opportunity to buy PCH token right before the fork, and when the fork commenced and both the chains that are BCH ABC and BCH SV were going neck to neck in the market, whales started to dump the BCH ABC token, which saw its prices decline by more than half in a matter of few hours.
It is clear from the above example that whales have control over the market and they can turn the tide in anyone’s favor. The main reason for such a fragile market is the price volatility factor in cryptocurrencies. So, can technology come to the rescue of the crypto market to avoid such manipulation? Let us find out.
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How Crypto Community can Avoid Market Manipulation
Cryptocurrency trade market is relatively new and gains much of the attention only after the miraculous price rise of Bitcoin in late 2017. The price surge saw hundreds of new tokens being created and listed on the market every other day. For a new technology which has no real-world entity backing it and every token is listed on a number of exchanges, all these factors combined make it one of the most volatile in terms of prices.
The price volatility is driven by the community sentiments and this makes it quite easy for the whales to manipulate it. In order to avoid such misdeeds by whales in the future, the crypto market needs to stabilize and cut down the volatility factor by a significant margin.
The recent bearish trends which have lasted almost for 6-month has brought some price stabilization for sure. Many traditional wall street investors have acknowledged the fact that the recent trends could actually prove beneficial for the crypto trade market as the volatility factor has been cut down significantly.
If traditional investors who have maintained their distance from the crypto market expand their portfolio to crypto, it would do a world of good for the crypto ecosystem. It would bring in more value, acceptance and also make it tough for the whales to manipulate it. Acceptance is the biggest factor which might come through technological refinement, making crypto tokens more acceptable and avoid the tag of security.
The acceptance level can also increase through better regulations and that seems to be happening all around the globe. Major governments around the globe are either on the verge of finalizing crypto regulations or have already implemented them. Thus, the future of crypto and crypto trade markets look good.
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