Once again the bogey of market manipulation by cryptocurrency exchanges was raised by Daniel Mark Harrison, one of the founders of Zurcoin in his editorial post on Medium. Harrison pondered about the stability factors of markets in the long run when manipulations are ingrained into everyday trading activity. He stated that these fraudulent trading practices are contrary to the core principles on which cryptocurrency evolved, which is the concept of decentralized currencies.

Force crypto prices down

Harrison alleged that the most common practice on exchanges is to “move the prices of crypto prices downwards” to the extent that the holder eventually abandons his or holding. This means such orphaned virtual assets will become the property of the exchange and thereby such operators are increasing their asset holdings, in an underhand and manipulative manner. Cryptoexchanges are currently under tremendous pressure since there is involvement of high operating costs and at the same time low margins.

The full text by Harrison specific to market manipulation reads as follows:

“The cause of this behavior is clearly that running an exchange is, by and large, an extremely cost-intensive, highly competitive, low-margin business, which holds next to appeal for entrepreneurs wishing to cash in on the new digital gold rush.”

The veteran cryptographer is of the view that exchanges gain by externally and ‘artificially’ manipulating the prices of these crypto assets by control the prices to remain below a certain margin. When the prices are so dismal, typically investors would rather not convert or hold such assets and thereby gives exchanges an opportunity to take over the crypto asset.

Another typical trick and supporting services such exchanges engage in is to offer such investors “knockdown” offers in fiat-equivalents thereby encouraging them to leave the asset behind on the platform.

Harrison also claims that in the case of Bitcoin, the market capitalization was $284billion in 2017 December. However, by 2018, the volume of this famous cryptocurrency had dropped from $14 billion to nearly $4.3 billion and market capitalization was a mere $59.9 billion. This established the fact that volumes were at 4% of the market capitalization of 2017 even though the over price drop was to the tune of 82% over twelve months. There was actually an increase in volumes in terms of market cap by 9%, the expert opined.

Zurcoin’s founder states that,