How do “market whales” manipulate cryptocurrency prices?
Cryptocurrency prices are still witnessing sharp fluctuations, the latest of which was what happened with the "Enzyme" currency in 2022 AD, whose price witnessed major imbalances within a few minutes due to calls from mysterious parties on social media to invest. One of the cryptocurrencies witnesses a sudden rise in prices before collapsing, as speculators do not hesitate to launch sudden operations to inflate the value of these highly volatile digital assets and achieve profits.
Behind this movement is a group on Telegram, through which several investors chose their target before they took action.
“In financial markets this is illegal, but thieves are exploiting the less stringent controls on cryptocurrencies,” says Mircea Mihaescu of Coinfirm.
To give more momentum to their Anzyme move, they also used the popular social network Twitter to encourage others to invest as well.
"Whales are scooping up a lot of MLN (enzyme). It's worth a shot," tweeted someone under the handle "CryptoSanta."
Enzyme Finance, the company that runs the cryptocurrency, tried to calm things down, calling for caution against “fake accounts” seeking to suddenly inflate its value. But it was too late, as many investors had already taken a risky path, buying and then selling quickly before prices fell and demand dried up.
Everyone lost!
But almost everyone lost because it was important to move very quickly. On the Enzyme side, "the price went up for a few minutes, and the only ones who didn't lose money were the ones behind the initiative," economists said.
"In all these manipulations everyone is confident" that they will benefit from higher prices, explains behavioral economist Stuart Mills of the London School of Economics.
The phenomenon is not isolated, as there are other groups promoting a similar operation in the coming days.
Data expert Matt Ranger says that most of these moves are initiated by people with a particularly strong sense of marketing. “You don’t need to know how to code or program,” he says. It’s enough to craft messages that resonate with crypto investors, for example by emphasizing the vulnerability of large economic institutions.
What is cryptocurrency?
Conspiracy theories are spreading.
Conspiracy theories abound, with some suspecting that large US investment funds engineered the current cryptocurrency crash in order to buy them up at bargain prices.
“Suddenly, all this unethical behavior becomes more justified,” says Stuart Mills. “Investors say, ‘I got screwed and now it’s my turn to screw other people.’”
“The only buy orders are coming from these guys on Telegram and Twitter,” he said, before the moment comes when there is no real demand from investors for the coin in question and “everything collapses.”
A few days ago, European Central Bank President Christine Lagarde said that cryptocurrencies are “based on nothing” and should be regulated to discourage people from speculating with their savings. Speaking to Dutch television, Lagarde said she was concerned about people “who don’t understand the risks, who will lose them, who will be very disappointed… So I think they should be regulated.”
Lagarde's comments come at a time when the cryptocurrency market is experiencing huge volatility, with the value of Bitcoin and Ether down by around 50% from their peaks last week, and the asset class (a group of investments with similar characteristics and regulations) is under scrutiny by regulators for the risks it may pose to the wider financial system.
