Mechanism of operation, consequences, and methods of protection against market manipulation on exchanges

On financial markets, there are various manipulation strategies aimed at distorting the real value of assets and obtaining illegal profits. Among them, special attention is given to tactics of artificially creating volatility and price fluctuations of certain securities or cryptocurrencies. Let's take a closer look at how such schemes function and what impact they have on the market.

Artificial Price Inflation of an Asset

This strategy involves deliberately increasing the value of a financial instrument through mass buy transactions. This creates the illusion of rising demand and encourages other investors to acquire this asset. As a result, a rapid price increase may occur over a short period, attracting the attention of new market participants looking to gain quick profits.

Artificial Devaluation of Value

The opposite tactic involves mass selling of an asset at an inflated price, causing panic among holders who begin to offload their positions. As a result, there is a sharp decline in quotes, leading to significant losses for those who did not manage to liquidate their assets before the collapse began.

The Principle of Manipulation Actions

Such manipulations are usually carried out by organized groups coordinating their actions through internet resources and social platforms. They may resort to advertising the asset, spreading false information, or even creating fake news to influence investor behavior. After artificially creating demand or supply, the group provokes a short-term change in the asset's value in the desired direction.

Negative Consequences

The results of such manipulations can have a destructive effect on the market and its participants. Sharp price fluctuations can undermine trust in financial instruments, increase market instability, and even provoke investigations by regulatory authorities. Uninformed investors risk incurring significant financial losses.

Precautions

To minimize the risk of encountering similar schemes, investors should remain vigilant and cautious. It is essential to conduct thorough analysis of assets, critically evaluate recommendations from unverified sources, and stay informed about current market trends. It is also advisable to pay attention to trading volumes and conduct independent research before making investment decisions.

In summary, it can be said that the manipulative strategies considered pose a serious threat both to individual market participants and to the financial system as a whole. To protect against the associated risks, it is crucial to be informed, take initiative, and exercise common sense when managing one's investments.