The bitter truth of the cryptocurrencies is it changed frequently and freckled in nature. No one can say what will happen in last few minutes. Previously there was a major concern about the frequent and significant price fluctuations in some major cryptocurrencies. However, the situation is still there in today’s cryptocurrency market. One can take the example of the largest and most-used currency in the world, i.e., Bitcoin. As per the report, the value of Bitcoin cryptocurrency had gone up to $20,000 in the year 2017. But after just a few weeks, the Bitcoin moved to the third place in the market.
If looking back in the past, the process of the price fluctuations occurs on the large period and can stretch over many weeks and months. The price fluctuation can take place in every second. On the other side, such fluctuations have developed some criminal activities in the cryptocurrency market. Some people are now taking benefits from the dash fluctuation of prices of famous cryptocurrencies, such as buying up the demanded the hottest tokens at a lower price and then selling them when the price comes to stable condition. Now, there is a new trend of such activities which is called us Spoofing in the cryptocurrency market. Here the traders develop the fantasy of optimism in the crypto market. They try to influence the price of the cryptocurrency by generating faulty orders. The traders develop an illusion of volume, market condition, and census and lead the crypto market aside of certain price set.
How Does Crypto Spoofing Work?
The cryptocurrencies are tradable securities, and its price depends on various factors such as the sense of optimism or pessimism defusing the broader market and the investors. It is quite difficult to quantify the potentiality and momentum of the cryptocurrencies. However, the comprehend investors are highly adjusted toward it. The impact of pessimism and optimism can affect the individual’s attitude to buy or sell their cryptocurrency. The truth is individual sentiment has fueled the spoofing and running effectively.
Many traders are trying to manipulate the crypto market for the cryptocurrency which can create both the pessimism and optimism illusion by broaching fraudulent buy or sell off the digital currencies. Traders do generate the orders, but they have no intention of filling those orders. They then illegally motivate the investors for buying and selling. The price of the digital currency can be adjusted accordingly. Once the value of the cryptocurrency starts moving in the direction of investors desire, the traders cancel the orders.
The Practice Of Faking In The Cryptocurrency Market
As per a report, after a spoofing case, recently the U.S Department of Justice (DOJ) initiated an investigation to find out if the bitcoin currency suffered through the cryptocurrency price manipulation or not. The DOJ has submitted a report which informed that the digital currency trading across the world enables traders for spoofing. It may be noted that the authority considered to carry on the investigation for Bitcoin currency. The reason behind this is bitcoin has the largest market value and last year the currency witnessed the biggest price hike which took new investors to the high.
Whenever cryptocurrency spoofing takes place, it goes along with wash trading. It is also like the spoofing process which manipulates the value of the cryptocurrency by the unreal way, but its implementation is different than spoofing. What traders do in this is, they trade with themselves to show the market demand of the cryptocurrency, which is false. This is all to drive new investors to the trade.
John Griffin, a finance professor at the University of Texas, has stated that there is a high chance of spoofing in the field of cryptocurrency market. He further stated that there are few things to keep an eye on illegal trading, wash trading and crypto spoofing. Without any strict supervision, it is quite easy to carry out spoofing and illegal price manipulation.
Protection Against Crypto Spoofing
Now the big question is how an investor can carry out secure and safe crypto investments while there is spoofing in the market? The only thing that the investor can do is take extra caution. Apart from that take extra care of the offers which look very attractive. The investors need to make sure that they have carefully observed all the possibilities of wash trading, crypto spoofing, and other fraud types. On the other side, some cryptocurrency exchange agencies are enhancing their security system to protect their customers from spoofing and wash trading.
For example, owned by Cameron Winklevoss and Tyler Winklevoss, Gemini Exchange has now partnered with the National Association of Securities Dealers Automated Quotations to carry on the investigation about the cryptocurrency trading.
However, it has been seen that no matter how carefully one investor has observed the market; he/she can face crypto spoofing while trading cryptocurrency. The crypto market is full of risk and but with adequate precaution, the risk can be minimized.