How cryptocurrencies can be manipulated by criminals

How cryptocurrencies can be manipulated by criminals

Crypto coins are based on systems that are protected from fraudsters or fraudulent activities but based on the past crypto market activities of bitcoin, the United States Department of Justice has initiated a criminal investigation to look into the manipulation behind the price fluctuation of bitcoin. Now the question arises that despite the system is so sophisticated, how can such a situation arise, especially when it has been created to be foolproof.


The system of blockchain possesses an advanced feature where every successful transaction is recorded in an online blockchain ledger. But apparently, you can’t exert power in the system to get the money back, and the technology itself does not let people reverse the process. But this can only occur when the transaction happens in the system itself. There are also other factors in this technology that makes it easier for criminals to scam investors.

Trading of bitcoin in the same process as of stocks

According to the US Department of Justice, the price fluctuations in bitcoin and other such cryptocurrencies are happening because some people are treating these coins as bonds or stocks rather than using them as a form of currency which was the main intention behind the creation of these coins. These people are placing orders at first and paying for them at a later period. Also, there is another type of fraud called ‘spoofing’ that is taking place, in which people are placing an order to buy bitcoin, and just before the deal is going to be finalised, they are cancelling the whole transaction and that too without paying a service fee.


In the meantime, this process is showing that there is an increase in demand for bitcoins which is not true at all. And in the process, the value of bitcoin is rising. Most of the assets are at the mercy of this kind of market manipulation, and especially bitcoin is more prone to it. The reason behind this is that only a few people are in possession of large amounts of bitcoins. 40 percent of bitcoins are owned by the top 1000 accounts, and 20 percent are in under 100 accounts. With these few account holders, bitcoin’s market can be easily manipulated.


Most of the people who have been in the cryptocurrency market for years are in possession of huge amounts of digital coins. These people can also coordinate with each other to create an artificial pull because the crypto market is not under any regulation, and as a matter of fact, it will not be illegal for them to conduct these operations. And the protection rights offered by cryptocurrencies are limited because the field is relatively new.


There are also several other instances of fraud where one person initiates a legitimate deal, but it actually turns out to be a fake, and in the whole process, he will deal with himself. This type of fraudulent activity is called ‘wash trading’.

People will keep on finding loopholes in the system to conduct criminal activities. To protect the consumers, every nation has to stand together and take important steps towards cryptocurrency.

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