How Traders Avoid Manipulation

David Kemp

Crypto market suffers from manipulations. This issue is not new to the community. Traders admit that they know and understand how the system works and sometimes develop their strategies to protect themselves from the unexpected.

According to most market analysts, there are three ways that BTC traders can trust when they wish to spot manipulations and, as a result, avoid them when they deal with the crypto market. Institutions do not mind BTC and are ready to embrace the crypto. Nevertheless, BTC whales still influence the market – they keep utilizing hidden orders. Besides, many practice and support wash trading.

Many traditional markets, on the whole, are different. Of course, crypto exchanges aren’t so easy to regulate. Almost all crypto traders are aware of various cases demonstrating the level of some aspects of price action and know that it can be manipulated.

Even though it is reality, many participants feel powerless – they don’t always know how to protect themselves from the whims that they oftentimes see come from whales. They need instruments to deal with unfair market players that reshape the structure and change the system to their advantages. Hidden orders do a lot of harm to participants. Another serious issue is spoofing. Such tactics make the market less favorable and comfortable for other users.

While tracking such people and their moves, participants develop new strategies and avoid them. Here are three key things users can do to protect themselves from deception.

Major Aspects to Bear in Mind

Whales may utilize the so-called hidden orders and do this whenever they desire to place asks and bids that aren’t detected. In this case, the book does not show them. Replenishment is automatic, which helps them stay invisible and avoid being detected.

Taken from OKEx

These iceberg orders shown in the diagram involve huge amounts. Anyone can use them on many exchanges. The majority of buy/sell walls do not require any execution. They simply reflect great flows and the trader cancels them once the market approaches certain levels. There are too few participants who would be willing to self-report the flow unless they execute it. There is no need to monitor the books to avoid the issue since this approach is not efficient.

Wash trading involves many exchanges at a time. Whales manipulate participants by showing huge trades on several major exchanges where monitoring is heavy. Also, they’re practicing something totally opposite on an exchange that is significantly smaller. Professionals may apply this method to gain huge profits. Unfortunately, some do it to make their real flow unidentified.

While boosting the volumes of smaller venues, whales receive a reward and gain low fees. It’s legal yet it deludes participants and makes others believe in buy/sell flows that do not even exist. Simply avoid large trades and concentrate on longer price trends. Analysts say that’s the surest way to get rid of misleading ideas.

Whales may also want to perform the liquidation of exposure and again that’s typical of markets that are over-leveraged. Similar methods and approaches are frequent. Gaining benefits is easy for a whale then – the trader opens an opposite position the size of which is similar. What they do may trigger a cascading effect and we see how short sellers strive to survive. Liquidation speeds up whales’ gains thanks to the previous long contracts. Bear in mind that there is an indicator that helps understand what is going on.

 

Taken from Skew

Compare contracts and see how they correlate with futures and use this method as a tool to see the trader’s position. Inverted as well as flat curve signs that whales are bearish. Premiums over one percent serve as a bullish indicator.