1. What is Cryptocurrency Spoofing ?
2. What is its impact on the market and price?
3. When is Spoofing effective? And when is it not?
4. Is spoofing illegal?
Have you wondered how whales deal in the markets and those crazy influences and powers they have?
Below we will explain to you one of the cheating methods.
Warning: Spoofing is an illegal strategy in equity exchanges. When you buy or sell a cryptocurrency, it has some hallmarks of trading official currencies, such as the Euro, U.S. Dollar, and Japanese Yen.
What is Crypto Spoofing?
Crypto Spoofing is one way to manipulate the market by placing fake orders to buy or sell assets, those orders are usually used by trading bots or algorithms to place buy or sell orders automatically. When the orders are close to being fulfilled, the bots cancel the orders.
The main idea is to try to create a false impression of more and more people buying and therefore a false impression that there is a demand for the currency, which means that the price will go up and will continue to rise. Then, when the market approaches the level, they withdraw the orders, the price continues to go down and with it all the money Investors who entered the market from this base.
What is its impact on the market and price?
The reaction is often straightforward because there is no great way to tell if it is real or fake orders especially if it is accompanied by some of the patterns that traders are looking for such as when significant resistance are broken.
lets take our current Bitcoin price we have a strong resistance level at 50k. It is where we might expect sellers to bid for the sale of their property. If the price is rejected at a resistance level, it can drop sharply. Which is the ideal point and therefore when buyers see huge sell orders above this important technical level, they may be less encouraged to buy aggressively at this level.
When is Spoofing effective? And when is it not?
It can be effective between different markets which are all related to the same underlying instrument. Large fake orders in the derivatives market may affect the spot market for the same asset and vice versa.
It can be less effective when there is a higher probability of unexpected market movements.
For example, in the previous example, if a strong spike occurs and the fear of missing out (FOMO) among retail traders suddenly leads to massive volatility, fake orders can quickly fill up in a matter of seconds.
But they all depend on the specific market environment and many other factors that are mainly linked to the platform, so using unknown platforms with low trading volumes will increase your deception in this way.
Is spoofing illegal?
Spoofing is illegal in the United States. The U.S. Commodity Futures Trading Commission (CFTC) is responsible for overseeing spoofing activities in the stock and commodities markets.
In the U.S., spoofing is illegal under the Dodd-Frank Act of 2010 Section 747. The section says that CFTC can regulate an entity that
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demonstrates intentional or reckless disregard for the orderly execution of transactions during the closing period; or is, is of the character of, or is commonly known to the trade as, ‘spoofing’ (bidding or offering with the intent to cancel the bid or offer before execution).
Read more: https://www.federalregister.gov/documents/2010/11/02/2010-27547/antidisruptive-practices-authority-contained-in-the-dodd-frank-wall-street-reform-and-consumer
Sources
Code:
https://cleartax.in/g/terms/spoofing
https://www.federalregister.gov/documents/2010/11/02/2010-27547/antidisruptive-practices-authority-contained-in-the-dodd-frank-wall-street-reform-and-consumer
https://academy.binance.com/en/articles/what-is-spoofing-in-the-financial-markets
https://cryptocurrencyfacts.com/cryptocurrency-and-spoofing/
https://www.federalregister.gov/documents/2010/11/02/2010-27547/antidisruptive-practices-authority-contained-in-the-dodd-frank-wall-street-reform-and-consumer
https://academy.binance.com/en/articles/what-is-spoofing-in-the-financial-markets
https://cryptocurrencyfacts.com/cryptocurrency-and-spoofing/