‘Spoofed’ buy wall overshadows Bitcoin’s surge above $9,000

Bitcoin’s tremendous rally above $9,000 has been overshadowed by illicit trading techniques on a popular derivatives exchange.

The use of manipulative strategies has seen the unregulated nature of cryptocurrencies rear its ugly head once again, with a trader or set of traders ‘spoofing’ a $50 million buy order on BitMEX to entice people into buying before pulling the order.

The US Commodity Futures Trading Commission (CFTC) recently posted an update about spoofing to its social media channels, pleading with traders to whistleblow on colleagues who were suspected of engaging in price manipulation.

The post reads: “[Spoofing] is when a trader has the intent to manipulate prices by entering orders and then cancelling them to give an artificial impression of market conditions.

“It is a form of market manipulation punishable by up to 10 years imprisonment per violation. Traders ‘spoof’ when they place an order in a futures market with the intention to cancel the order prior to execution.”

The technique was also seen on BitMEX throughout February’s rally to $10,500, although it has been going on since the 2017 bull run with cases being reported in September 2018.

Due to Bitcoin exchanges being largely unregulated, there is no way to prevent or clamp down on illicit trading techniques.

The SEC and CFTC in the US could impose rules to safeguard investors but BitMEX is inaccessible across all 50 states.

In the UK, meanwhile, the Financial Conduct Authority has issued a warning to BitMEX for “carrying on regulated activities which require authorisation”.

“This firm is not authorised by us and is targeting people in the UK,” the statement read, before warning investors to “be especially wary of dealing with this unauthorised firm and how to protect yourself from scammers”.

Responding to the FCA warning, a BitMEX spokesman said the company was already seeking advice.

“We are working closely with our advisers to assess the situation,” they told Coin Rivet.

“There is nothing more we can add at this time.”

Bitcoin price

Having broken above the daily 200 moving average and the $8,830 level of resistance Bitcoin is now setting its sights on the $9,330 level ahead of a potential move towards $10,000.

However, in order to confirm a breakout this evening’s daily candle needs to close above $8,830, with a drawdown below that point marking a clear rejection.

The price of Bitcoin has risen intriguingly alongside global equity markets, all of which slumped dramatically last week as fears grow surrounding a coronavirus pandemic.

Disclaimer: This is not financial advice.