NASDAQ is the second largest stock exchange in the world by market capitalization. It has been operating for a long time. National Association of Securities Dealers Automated Quotations (NASDAQ) was founded in 1971. Today it has more than 3,3k asset listings, and its market cap is around $10 trillion.
Operating for so long has made their security measures exceptional. They have decades of experience in developing tools for protecting the traditional financial instruments. Now they are willing to share this experience to help fight market fraud and manipulation within the cryptocurrency market.
“Regulators, brokers, and exchanges have surveillance teams that monitor activity constantly and advanced technologies to help capture and analyze abusive behaviors including pump-and-dump schemes, insider trading, wash trading as well as spoofing and layering,” citing Bloomberg.
Recent hacks and price manipulation
It is very common for small cryptocurrency exchanges to suffer from malicious attacks.
Recently we reported that a Japanese cryptocurrency exchange was hacked and almost $60 million in cryptocurrencies were stolen. Also, earlier this year, the biggest cryptocurrency exchange in South Korea – Bithumb, got hacked as well. Reports say that they lost around $31,4 million.
So as we can see neither small nor large-scale exchanges are safe from these hacker attacks. The fact which always gets applied to incidents like these is the price swings and manipulations which are believed to be the consequences to these attacks. That is not entirely true, because the market fundamentals stay the same. People sell their assets, and because of that, the price plummets. The best comparison is by Charlie Lee, the founder of Litecoin: “..if someone robs a bank, that does not change the price of gold!”
Gemini adapts this technology.
However, this all doesn’t mean we don’t need the Nasdaq experience in fighting fraud within exchanges. “Nasdaq licenses its market-surveillance technology to exchanges,” says Bloomberg. And by now, there already is one crypto exchange – Gemini, which has applied for this surveillance technology.
The Winklevoss twins founded the exchange, and they say that the Nasdaq surveillance “is tried and true technology that’s used by some of the largest exchanges in the world, so it’s an obvious fit. We love rules-based markets when the playing field is clear and straightforward, and there’s transparency,” said Cameron Winklevoss to Bloomberg.
The fearless traders
All this is right, and this was bound to happen, cryptocurrencies must be regulated as they are coming in as a new asset class. Although, this new asset class could be divided into many smaller frictions, referring to what Kraken exchange expressed earlier this year in their blog post: “being protected from market manipulation doesn’t matter to most crypto traders.”
I believe this statement is true as there still are many traders who are hunting for the x100 gains from small-cap coins. Also, investing and speculating on small-cap currencies can only be done in small volume exchanges. These exchanges are at the top of the list of being a hacking victim. But all that responsibility lies on the traders’ shoulders because he took the risk and started trading on an indistinct foreign exchange. The trader is aware that his choice of exchange might be wrong, but that is a part of the game. On the one hand – he can get his x100 on a coin, on the other, he can lose all his funds. I think this kind of “game” should always be allowed.
So there will be regulated exchanges and unregulated ones. Smart investors will always choose the regulated ones because there the funds are safe, and even if they get stolen someday, you can sue the owners and receive compensation. Whereas if doing business with an unregulated one, your funds are never safe, but at the same time, you can get more significant gains.
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