Crypto Market Manipulation is Overhyped...
Good day;
everyone seems (and has seemed for a long time) fairly obsessed with all of the manipulation, crazy wash trading, spoofing, etc in crypto. It's way less prevalent than people think. Goes without saying that you have your everyday pedestrian scammers organizing pump and dumps and using a few thousand bucks thrown to them by clueless retails as exit liquidity. In the past ~4yrs wash trading and pump and dumps have only been a thing on microcaps, where people that enter understand the risks quite candidly (although their expectations may still be a little skewed - but for other reasons).
Spoofing is literally non existent even on 5min time-frames on any top 100 cap on a relevant exchange. It is simply not feasible because of some super aggro algos that have been entering since ~5yrs ago (think stop hunting but hunting instead of hunting stops they hunt executions of suspicious orders; they get out of the position immediately after with minimal slippage and then counter trade, waiting for the supposedly spoofed order to exit). This alongside your classic Stoikov market makers (retails are also starting to run this start cause there are some nice open source scripts) make spoofing super difficult. Feel free to look at the orderflow yourself if you don't believe me. Very minor divergences, when you try to filter fee based MMs you notice that there are only like 5x delta imbalances per 100 period and super symmetrical volume profiles...
I am just aggregated by how impractical all of crypto-academia is. I think that no other field of finance makes such disgusting over assumptions. The problem is just your good old survivorship bias, not your wannabe SBF types telling a bunch of kids that bomboclat coin is going to pump.
If you disagree or have any questions or just want to have a cool discussion drop a comment :)
Ah, the classic debate on market manipulation in the crypto world – always a hot topic on the forums! Based on the highest ranked content on WSO, here's a bit of insight into the matter:
Prevalence of Manipulation: While there's a lot of chatter about market manipulation in crypto, it's important to note that the extent of such activities can be somewhat exaggerated. The crypto market is vast and varied, with different levels of activity depending on the size and liquidity of the asset.
Pump and Dump Schemes: These are more common with microcap coins, where the market is thinner and more susceptible to manipulation. Investors in these markets are typically more aware of the risks, although they might not always have realistic expectations.
Spoofing: This is a practice where traders place large orders they intend to cancel before execution to create a false impression of demand or supply. However, in the top 100 cryptocurrencies traded on reputable exchanges, spoofing is less of an issue. Aggressive algorithms have been developed to counteract such practices by hunting for these suspicious orders and quickly counter-trading, which makes spoofing less effective.
Market Making: The use of Stoikov market-making strategies, which are now more accessible due to open-source scripts, has also contributed to a more stable trading environment. These strategies help provide liquidity and stabilize order flows.
Crypto-Academia Critique: There's a sentiment that academic perspectives on crypto finance sometimes make broad assumptions that don't always hold up in the practical, fast-paced world of cryptocurrency trading. The real issue might be survivorship bias, where success stories are overemphasized, rather than the influence of bad actors in the market.
It's clear that while market manipulation is a concern, the reality might not be as dire as some believe. The ecosystem has evolved with tools and strategies to mitigate these risks. If you're looking to dive deeper into this topic or just want to spar with ideas, the WSO forums are a great place to engage with professionals and enthusiasts who share your interest in the crypto market.
Sources: 5 Key Reasons Why Bitcoin and Other Cryptocurrencies Went Under!, Industry Outlook: Crypto Hedge Funds, Percentage of HFs Secretly Investing in Cryptos?, Who else is making $$$ off cryptos?, Crypt0 Bros - Are You Still Believers?
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