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Inline with crypto liquidity, you should also be aware of “WashTrading ”and how it can affect your investment opportunities on any given exchange. Wash trading can happen with both high and low volume coins (although it is easier to do in low volume markets), and it is something to watch out for. Exchanges will often execute transactions where the accounts associated on the “bid” and “ask” sides, are both controlled by the exchange, or, in some cases, by very large stake holders. This happens so that the exchange can artificially inflate its trading volume and appear more attractive to traders who are always on the lookout for higher liquidity. It is not always obvious which exchanges are faking their liquidity through wash trading, if you are not familiar with that particular exchanges history. One good indicator is when you see an exchanges volume increasing without a corresponding movement on price. This is because the bots the exchange (or others) use to execute wash trades, are set to bid plus or minus cents, or fractions of a cent in relationship to last trade; so although volume picks up, price remains unaffected. This makes sense when you consider that if the exchange actually decided to purposefully affect pricing, it stands to lose substantially if the market does not move in the direction that they need it to move. Even the most established crypto exchanges have been known to use wash trading cycles to increase their volumes, but you should try to stay away from them even if you do so only when they are going through such a cycle. Wash trading can, although it not always is, be a sign of deeper problems; so it is best to be on the safe side and park your money on calmer shores while this is going on. If wash trading is going on in an exchange you need to use for any particular reason (like it provides special features), move over to another exchange until the dust settles. Crypto investment is about minimizing risk.
Market capitalization is determined by a simple formula (number of coins available X current market price = MC). It is important to note this formula works with “coins available” (already mined) as opposed to the potential future total supply of coins. Current Price is another one of those indicators that seems straightforward but is tricky to get right. It is a good indicator of current perceived value but not much else. As a matter of fact, p​rice should not be heavily weighted when evaluating a new coin;​ the crypto market is so immature and laden with manipulation, that the current price of a budding altcoin is nothing more than a place holder of a value that is yet to be determined. C​onsiderations of price should never outweigh those of technical potential. It is also important to view market capitalization as easy to manipulate. Sometimes miners will issue a huge number of coins, in the hundreds of millions, or even billions; because a rogue developer may engage in wash trading, these coins may reflect higher perceived value than their actually is, and because of the sheer number of coins, market capitalization may also reflect a vastly inflated figure. This is hard to do on high volume coins, but easy to fake on low volume markets, you have to watch out for this. It is generally a good idea to evaluate market capitalization in context with daily trading volume, as opposed to price. If you see a coin with low daily volume but high market capitalization, you are most likely seeing a manipulation of that coins price.


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Wed May 22 , 2019
The first part of this article is pretty straight forward; stay away from centralized systems. Any coin that is “issued” by either a person or a company, as opposed to minted via decentralized means, is suspect. There have been a couple of coins which have tried to capitalize on Bitcoin’s […]

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