Crypto Market Manipulation Schemes Grow More Coordinated, Threatening Integrity

Crypto market manipulation schemes are becoming increasingly coordinated, posing a significant threat to the integrity of the market. These schemes are no longer the work of individual rogue traders but are instead orchestrated by well-funded, highly organized networks. These groups operate across centralized exchanges, derivatives platforms, and onchain ecosystems, making it increasingly difficult to detect and prevent their activities.

Historically, market manipulation has been a persistent issue, dating back to ancient times. For instance, the philosopher Thales of Miletus used his knowledge of weather patterns to predict an olive harvest and lease olive presses at low rates, only to rent them out at inflated prices during the harvest season. More recently, the South Sea Company bubble and the Dutch tulip bubble are examples of market manipulation that left regular investors at a disadvantage. In the crypto world, early examples include the pump-and-dump schemes on the BTC-E exchange and the actions of Bear Whale, who crashed the market with a massive sell order.

Today, the crypto market is a multi-trillion dollar asset class, making it virtually impossible for solitary whales to manipulate large-cap assets. However, when groups of nefarious traders collaborate, they can still move markets. These coordinated efforts often involve private Telegram groups where traders plan activities targeting markets where they can have the most impact. This trend highlights the growing participation of major players in market manipulation schemes, presenting a new level of risk for the crypto industry.

In February, an analyst warned of large-scale manipulation risks involving spot Bitcoin ETFs. These instruments could put downward pressure on Bitcoin's price, particularly when traditional financial markets are closed. Such strategies could trigger liquidations among leveraged traders, creating temporary imbalances that allow large players to accumulate BTC and ETH at discounted prices. The interconnected nature of crypto markets means that the ripple effects of a successful manipulation attempt can extend far and wide, making it extremely hard to catch the culprits.

The integrity of the cryptocurrency market is at risk due to these coordinated groups, which have deep pockets, technical tools, and cross-platform access to execute and mask complex operations. Most exchanges remain reactive by design, making it virtually impossible to prevent market manipulation. As a result, attackers have a high chance of retaining the advantage, even if the window in which they can operate freely is becoming increasingly smaller.

Not all manipulators break the rules. For example, when a large fund starts buying a particular token through one of their public wallets to attract attention, it may not be illegal. Similarly, market makers propping up a token's price at the request of a project may not be breaking any laws. However, using thousands of exchange accounts staffed by dozens of users to inflate a particular asset is blatant manipulation. Exchanges are fighting back with increasingly sophisticated AI-powered tooling to detect and prevent such activities.

The threat of market manipulation has not dissipated in the multichain, multi-exchange era; it has multiplied. Exchanges are now locked into a game of whack-a-mole, trying to detect suspicious behavior initiated by hundreds or thousands of accounts simultaneously. Successful collaboration cases, such as when Bybit was hacked and other platforms stepped in to lend ETH and help it meet its withdrawal obligations, show that collective vigilance, data sharing, and early detection are becoming the most effective tools in safeguarding the integrity of the crypto trading ecosystem.