Day by Day, a large number of platforms as well as services have started adopting Cryptocurrency. There has been a continuous growth in the technology, opportunities and on strategies which are developed to cheat the system. In the last few weeks, Investigations are being carried out about price manipulation on some of the top cryptocurrencies. As per reports, there has been some type of manipulation carried out as well, such as cryptocurrency exchange platforms can falsely increase trading volumes. Here, Backdoor ICO strategy is checking the whole criticism.
Trading as Mining
For various cryptocurrency platforms, trade volumes play a vital role. An exchange having low trade volume will face difficulty in gaining customers. For various users in the crypto community, high trade volume is the single most important factor for a successful exchange. Some of the other ways by which exchanges can increase volume include zero-fee transactions and identical offers.
Several strategies have shifted to operate illegally because charges are being raised on the exchanges who have hired market makers to continuously trade, and increase the trade volume 2X from original by taking part in both the sides of the transaction.
One of the latest strategies for increasing trade volume may become troublesome because exchanges have started to pay traders on their platforms. This is called “transaction fee trading” in which the traders are given tokens by the specific exchange as a “gift” for trading. This is an old strategy which is investment world; it duplicates cashbacks and some of the impulses observed in FX and stock-market. By implementing these strategies, exchanges are making their platform more complex.
Several exchanges such as Coinbene in Singapore and Bit-Z in Hong Kong has implemented this kind of strategy to increase user base and trade volumes and achieved some level of success. The company which is largely disappointed by this approach is Binance. Binance is upset as it contains its own token for distribution via an ICO. Binance CEO Changpeng Zhao also criticized the model on social media stating that “If an exchange’s survival depends largely on the price rise of its own token rather than on transaction fee earnings, it has to drive up the token price. In this regard, less experienced traders and retail investors can hardly have the upper hand in the trading competition with those crypto whales, especially the exchange whale.”