08/11/19 09:10 UTC-5

Whale games: who manages the cryptocurrency market

Manipulators-whales: how the course of cryptocurrencies is artificially overstated
Manipulators-whales: how the course of cryptocurrencies is artificially overstated

On November 5, the price of the little-known ParallelCoin (DUO) cryptocurrency increased 4000 times in 24 hours. As a result, the DUO, which initially cost $1.5, suddenly rose to $6000. A quick return to the starting price convinced market participants to use the pump and dump scheme. Despite warnings from experienced market players, traders continue to lose money due to whale games – adherents of the “pump up and dump” tactics.


How whales play the market, and hamsters lose money

Pump and Dump schemes appeared in the financial markets a long time ago. The goal is to artificially raise the price of an asset, and then “dump” it to make a profit. Similar incidents have been repeatedly disclosed by the US Securities and Exchange Commission (SEC). But one thing is the “transparent” stock market, and a completely different situation with digital currencies.

Whales choose two winning tactics:

  • Selling an asset at a price below the market. Traders are in a panic, and they are rapidly selling coins. The whale calmly buys assets at a fallen value.
  • The illusion of a market crash. A whale places a large order with a low price compared to other orders. Then it cancels the application before execution. Traders expect a depreciation by buying cryptocurrency. Demand is rising, and the whale is selling assets at a high price.

Both strategies are disastrous for “hamsters” –  inexperienced traders who do not know how to recognize manipulator games.


Bitfinex bad luck: manipulating with Tether will lead to lawsuits

On October 3rd, Bloomberg published an article accusing Tether of manipulating the course. Scientists at the University of Texas conducted a study that revealed the following pattern: in 70% of cases, the release of USDT cryptocurrency coincided with an increase in the Bitcoin exchange rate.

A similar conclusion was made by analysts at TokenAnalyst. According to the analysis, the Bitcoin exchange rate is growing on the days when USDT tokens are issued – 19 out of 27 cases. Researchers drew the attention of market participants to potential manipulations.

Representatives of Bitfinex aggressively reacted to the prosecution attempts:

“We expect this deeply flawed article to be used by opportunists to file lawsuits. Perhaps this is precisely its purpose. Do not be surprised if lawsuits are filed soon. In anticipation of this, we want to clarify our position: any claims based on this article will be regarded as a shameless attempt to extort ".

The conflict with the exchange arose repeatedly. So, in 2018, the platform was accused of the fact that USDT is not connected with the dollar in a one-to-one ratio. The exchange in this case contradicted its own official document – White Paper.


Altcoins and Telegram are a suitable duet for artificially inflating prices

The increase in the rate of the ParallelCoin surprised little experienced market participants. So the user of the Twitter social network, Bitlord 01 recognized the scheme immediately. The manipulation was indicated by the absence of any information from the developers of the coin. Manipulating little-known tokens is much easier, since they are not very expensive and not in demand. Messengers (for example, Telegram) help in this, where you can anonymously attract the attention of investors and collect participants. All participants are informed that they must buy a coin at a particular moment. The course after such activity, of course, is growing. Then, participants are already selling the asset at a high price, and the price is going down sharply.


Experienced traders rarely fall prey to whale games. Participants check information about each coin. Find official exchanges pages to find out about the upcoming listing. Another important point – whales are difficult with those who do not give in to primary emotions. It is useless to play here.


Editor: Daria Mukhina

#cryptocurrency #pumpdump #whale #Bitcoin #Tether #Bitfinex



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