Could crypto Exchanges run market manipulation schemes?
After my recent posts on 'swarm layering', a reader asked a chilling question: "Do you see any possibility cryptocurrency exchanges could somehow support swarm layering schemes by using bots?" My response is that I still do not have any specific piece of evidence to prove such manipulations by exchanges but I can't exclude the possibility either. Objectively, pressed under the competition and particularly starting the activity, exchanges may have a strong motivation to use 'wash trade' artifice to create misleading artificial activity in their marketplace. They might well unloose their bots and follow a 'swarm logic' strategy to achieve deceitfully their manipulative goals. Exchanges could unleash a swarm army of bots to put in place an anti-flash-crash barrier to avoid bad press and serious financial damages. But the same exact bots could also be deployed to pursue complex market manipulations objectives by generating e.g. massive but entirely fake levels of support and resistance. To sum up: All exchanges could deploy such schemes without any real risk of being caught for the simple reason that there is still no regulatory nor self-regulatory AI-powered ad hoc audit and certification mechanism.