Crypto trading operates in a wild west frontier where things happen that would never be tolerated on stock exchanges. We must remember that when considering investment potential and trying to read "signals". The intent of this article is to bring some of these issues to your attention and to guard you against holding any notion that this market is fair or has the same protection as the stock exchange. Crypto is an interesting market but you have to know the risks and the dangers....simply sticking your head into a crocodile's mouth to see whether he will bite is not a better approach.
One example of the issues is the recently discussed tactics of "spoofy" a person or persons that are manipulating prices by placing buy or sell orders (many of which they never even intended to fill) in order to manipulate the prices. You can see CoinTelegraph's article about this below:
https://cointelegraph.com/news/single-trader-with-enormous-bankroll-is-manipulating-bitcoin-price-but-to-what-end
Another issue is what is known as the "rinse and repeat" strategy where a bitcoin whale (a person or institution) will start the "rinse cycle" by selling at less than market rate, which may cause panic selling by smaller sellers. They will then scoop up bitcoin at a lower rate and repeat. An article that dedicates more insight into this practice can be found here:
https://news.bitcoin.com/bitcoin-whales-and-how-they-make-market-waves/
These sorts of practices are not tolerated on stock exchanges but are harder to regulate in the largely anonymous and unregulated crypto world.
One of the greatest safe-guards against these sorts of abuses is liquidity: it may be possible to manipulate a small ecosystem, but as that ecosystem grows it becomes much harder. As bitcoin reaches higher and higher market caps, manipulation simply becomes much more difficult.
However, that doesn't apply to all of the coins out there. For example, even though IOTA is the fifth largest coin by market cap, it only had $36,000,000 in trading in the last 24 hours. Number 8 coin NEM had a paltry 11 million in trading volume. Those are very easy markets to move if a whale wants to. Those are compared with bitcoin's 2.5 billion in trading volume over 24 hours and ethereum's nearly one billion.
Be careful out there and remember that price manipulation does continue to occur. If you are only risking what you don't mind losing and follow a conservative value based long term investment model, you are probably on the right track.
