On the 2nd of October, a report was released by the Wall Street Journal, saying that trading bots (a well-known tool for Fiat and crypto investors) could be at the heart of the infamous volatility of the cryptocurrency market.
Bots can be bought online and can also be created if you have the know-how. The report by the WSJ contends just one issue which is regulation.
To fight fraud, more oversight is required, says report
Crypto’s lack of mainstream acceptance coupled with the leeriness of even savvy investors to take the plunge is caused by the lack of or infrequent regulation of cryptocurrency exchanges. Bakkt and Coinbase are two companies doing their very best to put a halt to this problem.
The WSJ claims: “While established markets like the New York Stock Exchange monitor for illegal trading and punish rule-breakers, crypto exchanges vary widely in their surveillance efforts. Most crypto exchanges are regulated lightly, if at all. The result is that crypto bots can be used to execute abusive strategies on an industrial scale.”
When the office of the New York State Attorney General (AG) Barbara Underwood released its virtual Markets Integrity Initiative Report, these concerns were well revealed. Contained in this report are information gathered through sending letters to a number of crypto exchanges, requesting they voluntarily give details of their practices.
The report by AG Underwood also revealed that exchanges do not have to register with the state or federal government in which they carry out their business transactions. According to WASH, this permits bots to “execute abusive strategies on an industrial scale.”
Other bots are even more subtle. They are designed to post sell orders at cheaper rates, thereby manipulating price changes. People normally, wait for a price dip in the market, using that as a signal to buy. Then once someone attempts to purchase the currency, the sell order is cancelled by the bot, boosting the price of a particular cryptocurrency such as Ethereum.
Striving hard to change the system
There are several forces putting all efforts to change this attitude as well as bring to crypto markets more order. Moreover, regulated crypto exchanges built on the framework of the current futures trading system are currently being developed. In a bid to crack down trading practices and shady investments, more than 40 state securities regulators have joined Operation Cryptosweep.
Furthermore, cryptocurrency manipulation is being investigated by the Commodities Futures Trading Commission (CFTC) and the U.S Justice Department. Sometimes, with assistance from within the cryptocurrency trading industry, the Securities and Exchange Commission (SEC) is doing what it takes to crack down on investment scams.