How are criminals manipulating the cryptocurrency markets? -
How are criminals manipulating the cryptocurrency markets? -

Although the distributed ledger, a technology on which cryptocurrencies are based, is meant to protect the transactions from fraud yet a series of crimes against manipulation of bitcoin prices has been investigated by US Department of Justice. 

The blockchain system has strong security features. Supposedly, if someone sends bitcoin to other and the transactions are recorded in the ledger, he/she couldn’t forcibly get the money back. This ledger follows certain criteria for transactions to take place. Though these security measures are followed only when it takes place within the system. The other elements contribute to the frauds taking place in the market.

Treating cryptocurrencies as stocks

Misconceptions of people have increased the extent of frauds to a certain level. People do not treat cryptocurrencies as an alternative to regular currency. Instead, they treat them as stocks. People place orders to buy bitcoins but cancel it without even paying the service fee. This process is known as spoofing. It consequently leads to a hike in prices of bitcoins as it seems to have increased demands.

People who have been a part of the cryptocurrency market for a long time are a greater risk to the manipulation of prices of bitcoin. A coordinated action of a group of people can alter the prices of bitcoins to large amounts.

Wash trading

It is a process in which the transactions look like a legit deal but actually he/she transact with himself/herself using two different accounts. Thus, the data indicates more activity in the market, artificially increasing demand and value.

Every second of every day, traders are trying to game the system and bargain every single benefit they can over their peers. One can set up multiple cryptocurrency accounts. Since the blockchain security system maintains the anonymity of a person, it is hard to identify the number of accounts of an individual. This promotes wash trading and challenges authorities to catch criminals.

Oversight procedure

Some countries have started to monitor and regulate cryptocurrency markets by using either current regulations or creating new ones. In 2015, it was found by a federal investigation that Ripple Labs(a U.S. based cryptocurrency company) is not following the anti-money laundering laws and rules about retaining precise customer identification information.

Majority of cryptocurrency trading, however, takes place in countries with few guidelines and negligent enforcement. From 2014 to early 2017, around 90 percent of global bitcoin trading was achieved through Chinese cryptocurrency exchanges. Many of those businesses were allegedly found to falsely inflate their trading volumes to entice new customers. Although China has banned online cryptocurrency trading now, yet people are finding ways to continue the trade illegally.

The problems are likely to shift from these countries to countries that have a lack of strong rules. This is a matter of global concern, hence highlights the significance of international cooperation in investigations. Cryptocurrencies have been developed for global upliftment, hence it is time for nations to work together to defend the consumers.

We hope this article added a bit of good knowledge in you. You may also want to check out these How Are Blockchain, Bitcoin, and Cryptowallets Related?

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