Allegation on Several Crypto Exchanges for Manipulating Crypto MarketDecember 18, 2018
Daniel Mark Harrison, the Co-founder of Zurcoin, alleged that several crypto exchanges are using strategic manipulation of the digital assets in the markets.
This, in turn, threatens the stability of the cryptocurrency market and as well contradicts the idea of decentralization.
Harrison stated that exchanges are in reality stealing from their customers by doing all it takes to move the crypto prices towards a downtrend, thereby tiring investors to the extent where they will abandon their holdings, eventually enabling the exchanges to improve on their crypto asset holdings. This is a backdoor method of improving the assets of the exchange. This indeed is an unattractive operating climate due to low margins and high operating costs for the exchange.
Harrison’s expresses this concept based on the rational market behavior concept that it is not possible to see reduced market capitalization versus increased volumes. Such a projection is possible only after due market manipulation in the exchanges. This is done to gain custody of user crypto funds, which is achieved by exploiting the psychology of the retail investors.
He further cited Bitcoin as an example and explained that in December 2017, the volume of Bitcoin was at $14 billion out of the overall market capitalization of $284 billion. In 2018, the volume was at $4.3 billion out of the overall market capitalization of $59.9 billion, which shows that volumes were at 4% in market capitalization during 2017. This is despite the 82% decline, which is not a rational possibility.
There are obvious reasons why exchanges exhibit such market manipulative practices. The running of exchange is expensive and cost prohibitive through different market trends. The competition is as well high. The business has low margins. The industry provides the appeal required for the entrepreneurs who are willing to cash in by venturing into the Goldrush. These entrepreneurs tend to mint cryptocurrency in volumes to facilitate virtual currency trades thereby hoping to annex a majority of the cryptocurrency tokens of their customers over time.
Thus, these exchanges create an artificial price situation and thereby lead to a downward trend from the peak prices. Thus, when the price goes downwards, clients lose their interest, and eventually, they withdraw their discounted holdings. This way the exchange according to Harrison takes control of the holdings after offering knock-down .pay equivalents to their owners. Eventually, when the market recovers, the exchange makes huge profits and also improves in liquidity. They also repeat the scam at a bigger level for greater profits.