The cryptocurrency industry is one that’s as promising as it has been plagued. Over the years, there have been a thousand and one different innovations that serve one purpose or another either to improve the general effectiveness and efficiency of the market in general or as a push towards the global adoption of not just cryptocurrency but also the blockchain technology. However, on the other hand, the industry is tormented with so much manipulation that it now seems to have a lot in common with regular traditional transactions.
Cryptocurrency has always promoted the fact that its transaction fees are much lower than what you would find in the traditional financial sector, but is this always the case? Ethereum transactions, for example, requires for the sender to pay GAS. This is a compulsory transaction fee to guarantee the completion of a transaction without which it will not be initiated. Under normal circumstances, the GAS fees are not too much but sometimes, certain events push it really high.
Certain market conditions could move investors to move money around in such a way that GAS fees skyrocket. Now, these things could happen pretty naturally, but what if it’s a result of deliberate manipulation?
Is Decentralization a Good Solution?
When this became a major problem some of the major exchange firms decided that a good solution would be to set a fee limit calculated by a specific percentage of the funds to be transacted instead of the freedom of setting whatever GAS anyone wanted.
However, it seemed a bit ironic because one of the most promoted features of the entire crypto industry is its decentralization and these centralized exchanges seemed to be “straying”.
Now, the decentralized option involved the exchange only serving as a facilitator or go-between for peer-to-peer trading. However, the P2P option is also very prone to manipulation.
Using an arbitrage bot was one way to do this because they could scan for price differences and make huge profits off them. Due to the decentralized nature of these exchanges, traders could practice front-running very easily.
Front-running is when the details of a trade are already known to another trader and the latter could not just anticipate but also quickly profit from it before anyone else can.
Generally, it’s almost completely impossible to specifically tell the level of manipulation being faced in the crypto market but regardless of whether or not we can be precise, on question needs to be asked.
Is it possible all these factors are regular market indices that may affect any financial market in one form or the other and not just cryptocurrency alone? Or, is this something that runs a little deeper in the crypto world?