WSJ: Automated Trading Programs Manipulate Digital Currency Prices
WSJ warns about manipulations on the market.
The new research by Wall Street Journal (WSJ) shows that automated trading programs and bots are capable of manipulating cryptocurrency prices on the exchanges. Automated trading software is a program which allows traders to set specific rules for joining and leaving the deals and also send requests to exchanges and execute them automatically with a significantly greater speed.
Trading software is available for both traditional and cryptocurrency markets and may be applied both for conducting legitimate operations as well as employing manipulative strategies. Regarding the cryptocurrency markets, WSJ stresses on the absence of reliable regulations of digital currencies, which allows bots to conduct these manipulations.
CoinList president and co-founder Andy Bromberg denotes that such an activity is burgeoning on the cryptocurrency market. It affects both the reputation of the market and the specific investors.
According to WSJ, the hedge fund Digital Virgil Capital, which possesses an $80M capital, utilizes its own bots on few of its exchange platforms deployed worldwide. Stefan Qin, the hedge fund head, told WSJ that he constantly plays ‘cats-and-mice’ with the enemy bots. At the beginning of the year, Digital Virgil Capital lost its finances in ETH after one of the bots attacked the fund.
WSJ reports that the bot utilized spoofing technique, sending fake requests with aim to manipulate the price of a token on the market. Traders create fake orders only to cancel them later. These tactics, which is aimed to delusively make investors buy or sell assets, signaling about the high demand or supply, has been proclaimed outlaw on the markets of assets and futures in the U.S. in 2010.
WSJ draws Quatloo Trader as another example of the price manipulation on the cryptocurrency market. The underlying idea of the program is to simplify the work on the market using special built-in tools, which functions the same way as a spoofing. According to Quatloo Trader founder, it is useless to try to eradicate manipulations on the cryptocurrency markets. Instead, he suggests giving manipulation instruments in hands of small traders.
However, such programs are prohibited in traditional securities markets. The New York Stock Exchange constantly keeps an eye on the operations which may involve illegal trading and punishes the criminals.
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