Crypto whales have this incredible power over crypto markets that isn’t there or available in traditional financial markets. Anyone can roll up to a crypto exchange and deposit all of their Bitcoin and hit sell, and it’s starting to take its toll on the crypto trading world. Back in June, Bitcoin was approaching the $14,000 mark before a whale placed a huge sell order and forced it to hit the breaks. It’s this manipulation that’s frustrating crypto traders around the world, but is there anything that can be done to stop it?
Use KYC to Its Fullest
Placing a 1,000 BTC buy or sell order on public markets is nothing short of market manipulation, and this is a huge concern the US Securities and Exchange Commission (SEC) has. Now, every regulated crypto exchange has some sort of KYC, meaning exchanges know exactly who you are. One solution to the problem could be reporting these whales to the authorities for market manipulation.
In the stock trading world, it’s a highly illegal practice and can lead to significant fines and even jail time – just look at Jordan Belfort for example. Using KYC to crack down on these whales manipulating markets would quickly deter people from selling vast amounts of Bitcoin on public exchanges.
Enforce Dark Pools and OTC Desks
Another and slightly less drastic approach could be to enforce dark pools and OTC desks. If every exchange is required to have one of the two in order to pass regulation, then we could also see the end of manipulation. Exchanges could then place a limit on orders before they’re kicked over to the dark pool or OTC desk, where the large orders can still be filled but without impacting the market. Daily buy and sell limits could be placed to prevent whales abusing the system, or orders placed within a certain amount of time are merged.
Why Trust an Exchange With 8,000 BTC?
At the tail end of June, we saw a whale move 8,884 BTC to a Coinbase wallet. Now, crypto markets were booming before this transaction took place, and it’s suspected that this particular whale caused the markets to crash from the cusp of $14,000 down to the bottom end of $9000. That’s an awful lot of Bitcoin to have on an exchange, and one begins to wonder why any legitimate trader that’s not looking to manipulate markets would even try to sell it all at once.
Long story short, there are a lot of things exchanges can do to crack down on whales manipulating crypto markets, but we will likely never see anything done about it – that is until regulators step in. Unfortunately, for the time being we’re going to have to ride out the whale manipulation and accept we’re all pawns in their grand plan.