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Crypto Exchanges Are Vulnerable to Price Manipulation

cryptocurrency exchange

The crypto market has been suffering from losses since the start of the year. Though the crypto market reached its all-time high in January, regulatory changes have changed the climate. And just last week, the crypto market has lost almost 80% of its value. Altcoins suffered the most as there was a time when Ethereum lost around 45% in just 30 days. The crypto winter forecast is that it could also last for a couple of months.

However, one of the things that has been known to cause a problem for investors isn’t just the highly volatile nature of cryptos. Cryptocurrency exchanges have been seen by many as a problem in the industry. It has become vulnerable to hacking incidents. From Mt. Gox to Coincheck, hacking incidences has shaken the perception thinking that their funds are safe.

Japan’s FSA even decided to update its regulations right after the Coincheck hacking incident. It even made Kraken to back out of the country and look for another place where it can operate.

Crypto Exchanges Are Vulnerable to Price Manipulation

According to a month-long investigation that was conducted by the New York State Attorney General, cryptocurrency exchanges are vulnerable to market manipulation. Aside from the fact that it is prone to price manipulation, the lack of standard consumer protection has also bothered the New State Attorney General’s office.

The 32-page report entitled “Virtual Markets Integrity Report” was published on Tuesday. It has highlighted important issues for the industry including transparency, security, and fairness. Unfortunately, the report arrived at the conclusion that the exchanges are not doing enough to protect the investors. According to the report by Attorney General Barbara Underwood’s office, “The industry has yet to implement serious market surveillance capacities, akin to those of traditional trading ventures, to detect and punish suspicious trading activity”.

In April, former Attorney General Eric Schneiderman has already started an inquiry regarding the crypto exchanges. The purpose of the inquiry is to know more regarding consumer protection and transparency. There were ten exchanges that complied to the request while four did not comply. Among which is Kraken. Its CEO Jesse Powell tweeted during this time that the scrutiny was “tone deaf” and “insulting”.

No Licenses

In April, the attorney general’s office mentioned that digital currency exchanges Kraken, Binance, and do not have BitLicense but still provide New Yorkers with services involving buying and selling cryptocurrencies. It has been seen as a potential violation of the state’s crypto regulations.

The report mentioned that “In announcing the company’s decision not to participate in the initiative, Kraken declared that market manipulation ‘doesn’t matter to most crypto traders’, even while admitting that ‘scams are rampant’ in the industry”.

The Securities and Exchange Commission recently denied different Bitcoin ETF applications. The Winklevoss twins have already been denied twice by the agency. The second time around, the agency also noted that its concern is the possibility of price manipulation. This month, the crypto market is anticipating whether or not the agency will also reject the Bitcoin ETF application of Solid X and VanEck. Will the agency also sign the same old tune that it did with the last Bitcoin ETF applications?

Lee Jenkins

Lee is our resident cryptocurrency expert who knows the ins and outs of each coin and the blockchain technology behind them. You’ll find that most of our technical guides are written or overseen by Lee and they are all easily digestible by the new and experienced alike, so there is no better place to learn blockchain 101 than here. Occasionally you may see a news article from him if it’s tech related!