Can exchanges drive down prices by creating fake bitcoins?
One of the most fundamental strengths that we know for Bitcoin is that with this system, no one will be able to create new Bitcoins apart from the fixed process that is intended to create this digital currency. However, recently one of the managers of a digital currency exchange has made shocking statements about this. According to him, some exchanges are able to create and sell bitcoins to their users not in the main blockchain but only in their platform with the aim of manipulating the market. We will examine these statements further.
To Report Serhii Zhdanov, the CEO of a digital currency exchange, says that more extensive regulations need to be put in place to control foreign exchanges, and that financial audits alone will not be enough, according to Cointelegraph.
Zhdanov, CEO of the Exmo exchange, explains how market manipulation is common in the digital currency ecosystem, citing an example.
According to this executive director, in a simple example of how to manipulate the market, a person who intends to dump the market, goes to a foreign exchange that is not under financial audit, and pledges 10 million dollars (Tether), equal to 100 million dollars. Receives bitcoins.
Zhdanov continues his explanation:
The exchange in question creates these bitcoins only on its platform without having anything to do with the actual Bitcoin blockchain. Next, that person or that team that intends to market [قلابی] They are selling their received bitcoins at the price of 100 million dollars. [با این حجم فروش] Bitcoin price is dumped in all exchanges.
According to this CEO of the exchange, in fact these market manipulators can profit from price arbitrage like this.
After prices are dumped and reduced, they are the same amount of Bitcoin [که بدهکار بودند] They buy at a much lower price and make a profit in this way.
Zhdanov says that fighting these actions and preventing these possible manipulations requires the adoption of comprehensive and stronger regulatory policies such as stock market policies. Foreign exchanges should also be required to be regulated as first-level exchanges, or transactions between regulated exchanges and foreign exchanges should be restricted. In this case, the market will become a better place for all types of investors with any size of assets.
Also read: How is the digital currency market manipulated?
According to Zhdanov, in addition to these, another obstacle preventing the adoption of mainstream digital currencies is money laundering concerns. If more comprehensive regulations are followed, this concern will also be resolved.
Zhdanov adds in this regard:
Digital currencies, which are a new and rapidly evolving phenomenon, are very similar to traditional investment instruments. So I think there’s a lot we can learn from the stock market. The rules and regulations in the stock market have been tested and reviewed for a long time.
Zhdanov believes that while security is the key to the widespread adoption of digital currencies, due to the existence of wide security holes, malicious entities such as hackers go to digital currencies more than they go to banks.