When looking at manipulation, it’s common for market novices to take a negative view seeing it as criminal and unfair.
Actually though, it’s instructive to note that manipulation is simply an act of forcing your opponent into making several mistakes. It’s an act of strategy and is the way that experienced market participants earn their daily bread.
This is why major financial institutions continuously engage in rigging schemes in order to push and pull markets in whichever direction suits themselves.
I mention this because the cryptocurrency markets are and potentially will forever be unregulated. So rest assured, the practices that we will explore in this article are most certainly being deployed by groups and individuals in the crypto sphere.
Again, this is not a negative. It’s the status quo. It is the state of affairs that exists in every major financial market in existence.
Investors that are successful are the ones that learn these patterns. They are the ones that are able to pre-empt market makers, thereby benefiting from the heavy lifting of others.
We have to make it clear that institutional players are – by default, better positioned to gain a true understanding of market dynamics and therefore a true understanding of the genuine means and methods of getting the most from their activities within a particular market.
This is the case in any field of operation.
Tricks of the Trade
Plumbers, for example, are in such a position that they are fed daily reminders of how ignorant, ill-informed and naïve their customers are – which leads to manipulation.
They are constantly in situations that force them to realise that their customers know very little about the ins and outs of plumbing. So why not charge a customer for repairs that they don’t need?
The same thing happens in every accountant’s office globally.
In fact the main purpose of an accountant is to guide and assist someone toward hiding as much money from their government as is legally possible.
Manipulation is a major part of the human story.
This is why in 2015, top traders at five major banks were exposed as members of a crypto style pump group which they had dubbed: “The Cartel.”
…Don’t want other numpty’s in market to know about information exchanged within the group, but not only that, is he gonna protect us like we protect each other?Citibank Trader
Treating the USD as if it were DogeCoin
Starting in 2007 currency traders from Citigroup, Barclays, JPMorgan Chase, Royal Bank of Scotland, Bank of America and UBS used a private online chatroom to manipulate the USD/EUR exchange rate.
Membership was by invitation only.
Notable members included Rohan Ramchandani, Citigroup’s European head of spot trading,
Richard Usher – JPMorgan’s chief currency dealer, and Chris Ashton who was head of spot trading at Barclays.
Transcript excerpts of conversations show how traders from Citigroup and JPMorgan Chase coordinated their currency trades with traders from UBS, HSBC and other financial institutions.
In the chat rooms the traders coordinated hundreds of millions of dollars’ worth of currency for their clients, and revealed classified information on when these orders were to be executed.
Together, they bought and sold large units of either USD or EUR to drive and manipulate the price of both currencies.
…Whats the worst price i can put on this where the customers decision to trade with me or give me future business doesn’t change?…if you aint cheating, you aint trying!
Vice President, Barclays New York branch, 2010
These same acts of price control take place on a daily basis in the crypto currency markets.
Understanding the Game
In short, if you think that you’re going to walk into a market and not fall victim to those that are years and years ahead of you in terms of experience, knowledge and capital – then you’re completely wrong.
The difference between retail investors and institutional investors is the same difference between a child and an adult.
Institutional players have far more capacity to move markets using large amounts of capital.
Whereas retails traders simply do not.
The institutional investor takes a position in an asset and then forces a favourable outcome, whilst a retail trader purchases an asset – and then hopes and prays for a favourable outcome.
This is the main dynamic of all price movement that occurs across the world’s financial arenas.
This is what you must understand if you wish to become consistently profitable – especially in the crypto markets.