Research On Cryptocurrency Market Manipulation And Regulation

Since the birth of the cryptocurrency,the size of the cryptocurrency market exhibits explosive growth.Differ to traditional financial markets,cryptocurrency market is anonymous,distributed,loosely regulated,which leads to its market manipulation more frequent,more direct.Its often use anonymous social platform to release manipulation information,attract investors to participate in the market,enlarge the volume,and then profit from selling at a certain price level.This paper discusses the identification,warning,influencing factors,economic consequences of the market manipulation,examining the ability of regulation to protect uninformed traders,providing reasonable regulatory proposals,which has important theoretical and practical significance to the normative health development of cryptocurrency market.This paper mainly studies the market manipulation and the relative supervision recommendations of the digital monetary market,and gradually analyzed by the following three issues:First,how to identify and warn the price manipulation of the cryptocurrency market?What factors help to achieve effective(reach the declaration target)price manipulation?Second,how can the price manipulation affect the wealth transfer of market participants?How to affect the risk of the market?What is the impact mechanism?Third,the supervision behavior of different natures inhibit the efficacy of price manipulation?How to inhibit price manipulation in practice?This paper selects minute-level transaction data for 4,000 cryptocurrency pairs from the three largest digital currency exchanges from July 2021 to December 2021.captures text data from Telegram social platform for matching,builds a model of identification and early warning encrypting money market,analyzes the influencing factors of effective price manipulation,also,examines the influence of price manipulation on participants’ wealth transfer and market crash risk,analyzes the inhibition of internal and external supervision on cryptocurrency price manipulation,and proposes corresponding policy recommendations.First,based on a large number of rough text data in the social platform,the method of natural language processing and regularization matching is used to mark the time of manipulation,and the complete price manipulation data set is established.At the same time,for the pump and dump market manipulation,according to the trading volume,price,market value and other index characteristics of manipulation behavior,the identification model of price manipulation is constructed by unsupervised learning method,and the early warning model of price manipulation is constructed by supervised learning method.Both models show well accuracy,applying the above model to the following conclusions:(1)price manipulation exist in both of mainstream and non-mainstream cryptocurrency pairs,and the manipulated currency has generally seen significant retractions after manipulation,and price manipulation yields are even lower on mainstream cryptocurrency exchanges;(2)Supervision of relaxed environments and low-market cryptocurrency more manipulated;(3)The yield of the price manipulation is positively correlated to the ranking of encrypted digital currency,negatively correlated with the number of exchanges that the currency transaction,negatively correlated with the access amount of the platform manipulation information;(4)The manipulation yield is positively correlated with platform operating information in direct manipulation,while negatively correlated in conspire manipulation.Second,based on the sample of effective price manipulation,the impact of price manipulation on participant’s wealth transfer is analyzed.The following conclusions are drawn:(1)Price manipulation results in a significant wealth transfer from"uninformed traders" to "informed traders".(2)During the manipulation process,in a window before the "explosion point",the manipulation information leaks,the price of the coin increased,with the start of "explosion point",the currency price rose sharply,the transaction volume increased significantly.(3)The price of the manipulated currency was pulled up for a short time,peaking in about 2.9 minutes on average.Third,based on the sample of effective price manipulation,count the number of effective price manipulation of the same digital currency pair,and investigate its impact on the market crash risk of cryptocurrency.The following conclusions are drawn:(1)In the same market,the more times of effective price manipulation,the greater the risk of market collapse,especially in the small-cap cryptocurrency market;(2)Investor sentiment plays a moderating role.The higher investor sentiment is,the greater the impact of priceFourth,it studies the restraining effect of government laws and regulations,exchange regulations and media reports on price manipulation.The following conclusions are drawn:(1)The laws and regulations issued by government and the market manipulation bans issued by exchanges effectively reduce the number of cryptocurrency manipulation;(2)Media reports have no significant effect on inhibiting market manipulation.The policy recommendations of this paper are as follows:(1)Major countries should play a leading role and establish a joint regulatory framework;(2)According to the market manipulation early warning model,the exchange should identify price manipulation transactions,blacklist the relevant manipulation accounts,impose sanctions on them,also,remind the uninformed traders of the risks at any time;(3)The media should actively educate investors about the risk of market manipulation.The innovations of this paper are as follows:(1)In terms of research content and conclusion,this paper subdivides the price manipulation mode,and earlier studies the influence of price manipulation on traders’ wealth and market crash risk,and the inhibitory effect of external supervision on market manipulation.The empirical results show that the main purpose of price manipulation is to drive up the trading volume.As long as the trading volume increases,the manipulator can not only make a pump and Dump,but also obtain profits from parity or low-price shipments.(2)In terms of data and models,the paper collected the high-frequency volume and price information of digital currency,crawled the manipulation text information in anonymous social platform(Telegram)from time to time,and constructed the identification model and early warning model of market manipulation based on minute-level transaction data,with higher timeliness and accuracy;(3)In terms of policy recommendation,a joint policy framework for suppressing price manipulation is proposed from the government,exchanges and media.The deficiencies of this paper are as follows:(1)there is no study on the relationship between direct manipulation,conspiracy manipulation and traditional price manipulation.(2)There is no study on the influence factors of ineffective price manipulation.