Trading bots are some of the biggest drivers of the price of Bitcoin, a report by the Wall Street Journal has stated. The price manipulation has made the industry unfair to the smaller traders and is one of the key reasons regulatory authorities have been against the legalization of the trade. The bots have become more widespread especially in the past two years as the price of Bitcoin shot up. While many crypto enthusiasts have spoken against the practice as it gives undue advantage to the big traders who can afford them, some have insisted that the bots should become more common and availed t everyone to ensure fairness.
The Price Manipulation
A few months ago, the U.S Securities and Exchanges Commission shot down several Bitcoin ETF proposals as it was concerned the crypto market is manipulated by some traders. As it turns out, the SEC was right and the market is indeed swayed by a few traders using trading bots.
As revealed by the WSJ, one of the providers of the market manipulation tools is Kjetil Eilersten whose Quatloo Trader program provides Bitcoin traders with these tools. The tools enable traders to carry out deceitful practices such as wash trading, a practice in which traders make sell orders and then buy these orders themselves giving the illusion that the market is very active. This practice is illegal by the standards of many stock exchanges around the world as it misleads other traders on the activity level of a market. The purpose of wash trading is to lure in naïve traders who then buy when the price is high after which the price drastically drops after the ‘whales’ exit the market with huge profits. This pump and dump scheme has been decried severally by the U.S SEC and is one of the key reasons the regulator rejected the Bitcoin ETFs.
As it turns out, not everyone is convinced that wash trading and price manipulation is wrong. According to Eilersten, Bitcoin traders should accept that it’s a natural market phenomenon and join the club instead of fighting it. Speaking to WSJ, he stated that he believes that it’s much better to make the price manipulation tools available to everyone instead of outlawing them from the few who have them at the moment. He stated:
“If everybody can manipulate, then nobody is manipulating. You can’t ban anything from people who are dedicated to doing something
Price manipulation has been one of the key reasons institutional investors have stayed away from the market. These investors, who have billions of dollars on their war chests could be the push that the industry needs to break into the mainstream.
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