Cryptocurrency price manipulation is a reality check

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Cryptocurrency price manipulation is a reality check

David Gerard, an author and journalist, said that the number go up use of the phrase in the digital asset space dates back about four years.

While the term was used elsewhere before the 2009 creation of bitcoins, it points to a fundamental question at the heart of a $2 tn-plus industry: What is the impact of that on the value of the digital currency?

The market is understanding the true value of the virtual currency, as well as the price of it at $68,000 earlier this month, up from less than $30,000 at the beginning of the year.

Financial institutions have tried to appear more crypt-friendly over the past year. Some payment companies such as Mastercard and Visa have experimented with digital currencies.

In politics, advocates applauded the decision by El Salvadoran authoritarian Nayib Bukele to make bitcoins legal tender in September. Eric Adams, the incoming mayor of New York, announced this month that he wanted his first pay cheque inbitcoin.

This does not necessarily translate into a healthy industry, according to critics. Gerard says that the markets for digital currency are hugely manipulated. The scam is who gets to cash out when the bubble collapses. There are lots of reasons to be deeply suspicious. There are a number of mechanisms that sceptics point to when alleging market manipulation. Whales that typically own more than 5 per cent of a coin are a case of this. They have the ability to influence the price of the larger market by holding onto their hoards, keeping them out of circulation and driving up the price. If they want to add to their holdings, they can sell enough to make the price fall.

Its connections to other cryptocurrencies have raised concerns about its pricing. A paper from 2019 suggested a link between the price ofBitcoin and the stable coin tether, which had to settle with the Commodity Futures Trading Commission and the New York attorney-general over the reserves that support its supposedly stable value.

Our findings provide support for the view that price manipulation can have substantial distortive effects in cryptocurrencies, said John Griffin of the University of Texas at AustinTexas at Austin and Amin Shams of Ohio State University. Tether argued that the paper was flawed, and the company, which says it has $72 billion worth of coins in circulation, has yet to give any details on the short-term debt that underpins about half of that.

There is a universe of other digital currencies that are beyond bitcoin. Doge coin was first introduced as a joke before the patronage of Tesla chief Elon Musk sent the price soaring. Even that is deemed too mainstream by some, it leads to conceptual offshoots such as baby doge and floki inu trying to capitalise on its success.

The way in which these altcoins - a broad term for all non-bitcoin cryptocurrencies - rise and fall in value can be opaque, in a space crowded with pump and dump schemes such as the squid coin. It was named after but unaffiliated with the hit Netflix series and saw its price go up due to speculation as media coverage drew in overconfident punters. The developers made $3.6 m of cash from those who thought they were in on the next big thing.

A dose of Fomo fear of missing out can be found in Cryptocurrencies looking to promote their products by using celebrities to endorse their products. A number of celebrities, from actor Matt Damon and American football player Tom Brady to reality television star Kim Kardashian, have appeared in ads promoting cryptocurrencies or related companies.

Ryan Atwood, better known as Ben McKenzie, is best known as Ben McKenzie in the teen TV drama The O.C. James Gordon and James Gordon in Gotham are highly critical of the practice. He says celebrities are not a problem with getting involved with products. He adds that there is a huge difference between Audible audiobook deals, or any other project that celebrities can sell, and effectively sell a financial instrument or gamble, and a gamble in which you have no idea what the risks are. The chance that number goes up is enough to entice investors to put money into cryptocurrencies. McKenzie says that the concern lies in the opaqueness of the sector. The surging price is linked to the relentless boosterism about the transformative quality of criptocurrency. It offers little certainty to buyers, let alone the regulators and governments who are still trying to grips with the future of digital cash.