Summary
Have you seen a crypto token with a dynamic price surge? There have been multiple examples that have come across this month. While it is not new for a crypto trader, it is always better to understand if this rally is organic or has been pumped by market manipulators. It is also necessary to keep updated and resist FOMO while making safe investment decisions.
Have you ever noticed the price of a crypto token skyrocketing out of nowhere? Have you ever wondered if it was organic or it’s being puppeted? Crypto is a fast-paced ecosystem and highly volatile. Sudden green and red candle towers are not new for seasoned investors. But, understanding the difference between a genuine rally and market manipulation is essential to make proper investment decisions. 
It is not just about price charts, it is about understanding the forces working behind it. In this article we will understand how to weed out deceptive maneuvers and pick legitimate projects.
Understanding the hype and the reasons leading it
Understanding the main reason behind the hike should be the first key indicator of a project. An organic price high will be backed by the project’s value and genuine utility. It is usually reflected by increasing investor sentiments who believe in the asset’s long-term potential. A rally is often followed by significant technological advancements like the launch of a successful protocol, network update, or improved efficiency. Another aspect guiding the boost is the announcement of collaboration or real-world use cases that can bring in more liquidity. Crypto works on trends and positivity. Any good news or analytical report boosts investor confidence leading to buying pressure. To sum it up, during a healthy market shift, an increase is supported by rising trading volume and liquidity.
The anatomy of manipulation
Market manipulation is basically creating an illusion of an asset’s price. It is a deception most commonly made through one of the most sophisticated methods, spoofing. A ‘bid’ is the highest price that a buyer is willing to pay for an asset. Market manipulators use it for their advantage by misleading the market towards the impression of high demand.
This begins when a large investor- a whale owning a lot of tokens of a particular project decides to sell them at a desired price. There is, however, no solid support to back the price they are aiming for. Hence, they place a huge bid of a significant number of tokens at a price above the current market rate.
Other traders, when they see a huge bid on the order book, mistake it for immense demand and act out of FOMO. This new entry in the market pushes the price and manipulators sell their holdings at their desired price. Once they sell off their holding, they cancel their bid orders. The demand vanishes and price crashes, leaving investors to sustain the losses. This is a classic format of pump-and-dump scheme where large bids act as the ‘initial pump’
How to identify red flags?
When chasing a green candle, don’t just go with the trend. Always check for volume and liquidity across different exchanges. Make sure it is not trading blatantly on just one or two exchanges, but shows volume increase across multiple platforms. A genuine rally will be uniform and not a short-lived spike. Also, it is a major red flag if demand disappears as soon as the price rises.
Keep yourself updated with the world news as well as happenings in crypto. Increase in price is often justified through new developments. Price rises based on vague promises by social media influencers are a big no. It should always be real-world news supporting the rally.
Look out for the devious patterns in the order book, mainly large orders that are paced and cancelled quickly.
Finally, never forget to research the team and project’s tokenomics. Learn their schedule unlocks to be clear of the pumping and dumping scenario.
By being cautious and doing thorough research anyone can avoid getting scammed. Crypto is a frontier of opportunities, but it’s also loaded with risk. Don’t let the adrenal rush of crypto high drive decisions. That is the only way to make sure you ride the right surge!
FAQ
What is market manipulation in crypto?
Market manipulation is when a whale creates an artificial demand or supply to book profit through spoofing.
How can one differentiate between a real hike from fake?
There are a lot of factors to keep in check when investing. One should always look out for real-world news or strong project fundamentals. Also, it becomes necessary to check if the rise is supported by volume across multiple exchanges or few.
