Ep. 45: The Dirty Little Secret of Crypto Exchanges
Welcome to the Brave New Coin video series. In this episode, we’re going to discuss the dirty little secret of crypto exchanges.
Crypto exchanges are the lifeblood of the crypto market. They are the entry and exit points for investors, traders, and speculators. Yet, many crypto exchanges have a dirty little secret that investors should be aware of.
The secret is that many exchanges manipulate their order books, allowing them to make money off of their customers. This practice, known as “spoofing,” is done by placing large orders on the books without the intent of executing them. The orders act as a lure for other traders, who think they’re getting in at a good price. In reality, the exchange never intends to execute that order.
The exchange is essentially front-running its own customers. It’s a dangerous and unethical practice, yet it’s surprisingly common in the crypto world.
In order to protect yourself from spoofing, it’s important to do your due diligence and make sure your chosen exchange is reputable. Check their volume, liquidity, and order book depth. Make sure they have a good track record of not manipulating their orders.
In addition, it’s important to diversify your trading across different exchanges. This will help reduce your risk of being manipulated by any one exchange.
Finally, keep in mind that exchanges are businesses, and they will do whatever they can to make money. Be smart and do your research to make sure you’re not getting taken advantage of.
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