Automated trading programs, or bots, have taken advantage of US regulatory loopholes to impact virtual coin market performance on crypto exchange operators, the Wall Street Journal reported on Tuesday.
Bots successfully and unrestrictedly are manipulating Bitcoin (BTC) and altcoin prices, the Rupert Murdoch-owned newspaper revealed by quoting four digital currency players, namely Virgil Capital, a venture fund, which has created own bots to counter abusive software programs that want to affect the company’s virtual coin investments; Quatloo Trader, a bot service that presents itself as “the best market-manipulation tool in the world of crypto”; one of Quatloo’s clients, Ryan Wright, who is an US citizen living in Taiwan ; and Coinlist, a platform that offers the issuance of new tokens.
“This sort of activity is rampant in the [crypto] market right now,” Andy Bromberg, co-founder, and president of CoinList, told WSJ.
“It hurts the market’s reputation, and it hurts individual investors.”
Virgil Capital, which is specialized in arbitrage practice, manages an $80 million hedge fund. The company has decided to establish own software as the fund lost Ethereum (ETH) investments on crypto exchanges earlier this year.
“We have had to build in error-handling functions to check for hostile and potentially illegal activities. Such is the Wild West of crypto,” Stefan Qin, managing partner of Virgil Capital explained.
Bots have been created not only as part of a corporate protection strategy but also as a core business model. Quatloo Trader, established by Norwegian Kjetil Eilertsen, offers several pump and dump tools, which aim to make the usage of abusive strategies as easy as just hitting a button. One of these services, called “ping-pong”, implements wash trading practices.
The US banned spoofing and wash trading in the stock and futures markets in 2010.
“If everybody can manipulate, then nobody is manipulating,” Eilertsen said.
“You can’t ban anything from people who are dedicated to doing something.”
However, last year, one of Quatloo Trader’s clients, Wright, decided to stop running the company’s services due to US regulatory activity in crypto bot practices.
Last month, the New York State attorney general published a special report about integrity in the virtual coin market, with bots named as one of the main examples of abusive trading practices.