Cryptocurrency Theft: Why Should Investors Care?
- Nanna Course
- on Oct 07, 2022
Investors don’t just care about making more money. They also care about their safety and security. This is observable in cryptocurrency, where consumers always protect their financial interests. People have developed this habit for fear of falling victim to possible scams and frauds.
There have been significant instances of such criminal activity in the past, and many developers and users have learned a hard lesson. It’s a concern that doesn’t seem to have an end in sight as cryptocurrency continues to grow and attract more and more people around the world. Perhaps the best natural way to deal with it is to stay alert.
There are other such crimes to mention, but what you may not have heard of is one that can be subtle to notice. It is the scheme by which criminals attempt to artificially influence the price of a cryptocurrency by creating fake orders. This is called cryptocurrency spoofing; if you are not fully aware of this, you could find yourself a victim one day.
As you know, pricing is a crucial part of crypto trading, which means that you cannot decide wisely if the prices of cryptocurrencies do not reflect their true value. To avoid mishaps, educate yourself on how this fraud is committed and how you can better protect yourself.
Cipher Spoofing in a Nutshell
As mentioned earlier, cryptocurrency spoofing is the process by which criminals attempt to influence the price of virtual currency by creating fake orders. To achieve this end, they would exhaust ways to reflect an illusion of pessimism or optimism in crypto traders. For example, authors can place large buy or sell orders without recording them.
Once this is done, other investors may buy or sell assets, and the price of the cryptocurrency may be adjusted accordingly. The trader can cancel orders when the cryptocurrency price moves in the desired direction.
In a bigger picture, here’s how it works!
Cryptocurrency is known to be a volatile asset. This means that frequent and large price fluctuations can occur, which was very common in the early days of the market. Sometimes this phenomenon can last for weeks or months, affecting various business transactions.
Although it may sound absurd, such results offer criminals a way to profit from the flash crashes of popular digital currencies. They would usually buy the hottest tokens at low prices and then sell them back once the prices corrected.
One factor that could push digital token prices up or down is the general sentiment of optimism and pessimism in the broader market. While this may be difficult to quantify under normal circumstances, it is something savvy investors are used to.
However, such feelings can allow criminals to commit identity theft. They may be able to manipulate the market for a given cryptocurrency by creating the illusion of optimism and pessimism through fraudulent buy or sell orders.
When cryptocurrency spoofing occurs, it is usually accompanied by a washout trade. This activity is similar to spoofing as it aims to manipulate the price of virtual currency through artificial means. However, there is a difference between the two criminal acts. In the fictitious trade, the author negotiates with himself to create the illusion of market demand; therefore, innocent investors may be lured into joining the trade.
How to protect against identity theft
For most cryptocurrency investors, a good trading environment should be free from potential scams and fraud. But as this is not always guaranteed, the remedy must be to observe precautions at all times. A strategy against spoofing is to be aware of opportunities that seem too good to be true and to always analyze the platforms used.
Today, many exchanges are exhausting their efforts to harden their security and monitoring systems to keep customers safe from cryptocurrency theft. But it’s a two-way process; investors should also do their part.
Investors should be vigilant about price manipulation in the digital trading market. It is also crucial to recognize that this space remains highly speculative and that digital currencies do not always prove to be a favorable investment, despite promising good returns.
Note on risks:
Cryptocurrency is a highly unpredictable market. This characteristic sometimes makes it difficult to detect crimes such as identity theft, as prices can be difficult to predict. However, there may be patterns you can follow to determine if price changes are reasonable at any given time.