Is 'Swarm Layering' Choking the Cryptocurrency Trading Markets?
Layering is a strategy where a trader makes and then cancels orders that never intends to have executed in hopes of influencing the cryptocurrency price. (See also: Wikipedia) Based on my empirical observations, I argue that this artifice is massively used to generate fake levels of support and resistance with the goal of producing a controlled sideways market forced on Bitcoin and extended to Altcoins, especially the top-tier ones.
If Layering is pursued by a handful of traders, it would be relatively easy to identify the perpetrators and face them with adequate punitive measures either based on an existing regulatory framework and/or a carefully crafted user policy. But there seem to be at least two techniques that allow this kind of systematic market manipulation to continue undisturbed.
The first one uses the well-known crypto signals and trade recommendations often based on structured and paid levels of individual membership.
The second technique is based on a massive utilization of cryptobots in the exclusive context of high-frequency trading (HFT).
In the empirical reality, we find always a mix of these two schemes. What distinguishes these techniques is their use of the Swarm Intelligence, that is, the collective behavior of relatively decentralized and self-organized small and very small trading agents.
The use of ad hoc and triggerable simplistic collective behaviors of hundreds and even thousands of human and/or cryptobot traders offers the needed “optical cloak” to fully hide the actual puppeteers. The collective behavior makes it impossible for any known regulatory framework to practically define the market manipulation perpetrators in order to ban and penalize them individually.
Such an increasingly complex situation creates dramatic potential risks for the cryptomarkets, which I will discuss in my next lab note.
If Layering is pursued by a handful of traders, it would be relatively easy to identify the perpetrators and face them with adequate punitive measures either based on an existing regulatory framework and/or a carefully crafted user policy. But there seem to be at least two techniques that allow this kind of systematic market manipulation to continue undisturbed.
The first one uses the well-known crypto signals and trade recommendations often based on structured and paid levels of individual membership.
The second technique is based on a massive utilization of cryptobots in the exclusive context of high-frequency trading (HFT).
In the empirical reality, we find always a mix of these two schemes. What distinguishes these techniques is their use of the Swarm Intelligence, that is, the collective behavior of relatively decentralized and self-organized small and very small trading agents.
The use of ad hoc and triggerable simplistic collective behaviors of hundreds and even thousands of human and/or cryptobot traders offers the needed “optical cloak” to fully hide the actual puppeteers. The collective behavior makes it impossible for any known regulatory framework to practically define the market manipulation perpetrators in order to ban and penalize them individually.
Such an increasingly complex situation creates dramatic potential risks for the cryptomarkets, which I will discuss in my next lab note.
Comments
Post a Comment