What Is Cryptocurrency Spoofing?

Cryptocurrency spoofing is the process by which criminals attempt to artificially influence the price of a digital cu✤rrency by creati𝐆ng fake orders. Spoofing is accomplished by creating the illusion of optimism or pessimism in the market.

Traders do this by placing large buy or sell o🔯rders with no intention of ever filling them. They trick other investors into eꦇither buying or selling when they do this and the price of the cryptocurrency may be adjusted accordingly. The trader cancels the orders when the price of the cryptocurrency moves in the direction they desire.

How Cryptocurrency Spoofing Works

Extreme volatility is one of the hallmarks of most 澳洲幸运5官方开奖结果体彩网:digital currencies. Frequent and significant 澳洲幸运5官方开奖结果体彩网:price fluctuations have always b▨een a concern, particularly in the earliest days of some of the major cryptocurrencies. The phenomenon continues.

Bitcoin (BTC), the largest digital currency in the world, has seen evidence of this. BTC rose to a high of more than $18,000 per coin in December 2017. It plummeted to less than half that value just a few weeks later.

There have been other meteoric rises and falls in the bitcoin price which has var🎀ied between $20,000 and $70,000.

Taking Advantage of Fluctuations

Cryptocurrency price fluctuations don't just occur on large time scales. They take place from second to second as well. This has allowed some criminal operations to benefit from 澳洲幸运5官方开奖结果体彩网:flash crashes of popular ✃digital currencies, buying up the hottest token💎s at low prices and then selling them when the prices are corrected.

Sentiments and Emotions Are Targeted

The price of a digital token depends on many factors including the overall sense of optimism or pessimism pervading the broader market and individual investors. This sense of the momentum and potential of a cryptocurrency can be difficult to quantify but it's nonetheless so♌mething to which savvy investors are highly attuned. These concepts are critical to the price of that token e𓂃ven if they remain somewhat elusive.

Emotio♌ns such as fear of missing out or large losses drive investors to make purchases or sales they otherwise might not. Spoofers count on these fears when makꦉing false transactions.

It Creates Opportunity

Spoofing is possible and effective because sentiments and emotions drive cryptocurrency prices more than any other factor. Traders who want to manipu🐼late the market for a given cr🌱yptocurrency can create the illusion of optimism or pessimism by initiating fraudulent buy or sell orders.

Spoofing is often accompanied by wash trading when it takes place. A market 🥃cheater trades with themself to create the illusion of market demand, luring unsuspecting investors into entering trades as well.

Effect on Investors

Many exchanges are ramping up their security and monitoring systems to guard against spoofing and protect customers. The use of regulated and r🌄eputable exchanges is more important than ever.

Even the most vigilant investors can be susceptible to price manipulation in the digital currency world, however. It's crucial to remember that this space remains highly speculative and that digital currencies are not the be-all and end-all of any investment strategy.

The Bottom Line

Cryptocurrency spoofing involves the artificial alteration of apparent trading volumes and influencing prices to take advantage of other traders' emotions and sentiments. The practice is illegal in the U.S. and in many other countries.