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How Artificial Price Fluctuations Work in the Market: Mechanism, Consequences, and Ways to Protect

Artificial price fluctuations are common manipulation strategies in financial markets used to distort the real value of assets and gain illegal profits. They are based on creating the impression of volatility and price increases for certain securities or digital assets. Let's take a closer look at how these strategies work and what their consequences are.

Artificial Price Inflation

This is the process of artificially increasing the price of an asset through massive buying transactions, creating the impression of increased demand, and encouraging investors to acquire the asset. This can lead to a sharp increase in price over a short period of time, attracting the attention of new investors looking to profit from quick gains.

Artificial Price Suppression

This is the opposite strategy, where the asset is sold off in bulk at an inflated price, causing panic among investors who begin to rid themselves of their assets. As a result, prices plummet sharply, leading to significant losses for participants who failed to sell the asset in time.

Mechanism of Action

These manipulations are mainly carried out by groups coordinating their actions through the internet and social networks. They may promote an asset, spread false information, or even create fake news to manipulate investor behavior. After artificially creating demand or supply, the group triggers a short-term price change of the asset in the desired direction.

Consequences

The consequences of such manipulations can be catastrophic for the market and investors. Sharp price fluctuations can lead to a loss of trust in financial instruments, increased market volatility, and even trigger investigations by regulatory authorities. Investors who are unaware of these schemes may suffer significant losses.

Methods of Protection

To protect against price manipulation, investors need to remain vigilant and aware. It is important to conduct thorough fundamental analysis of assets before investing, not to be swayed by recommendations from dubious sources, and to constantly monitor market news and events. Special attention should be paid to trading volumes and conducting independent research, which will help make more informed investment decisions.

Artificial price fluctuations are dangerous manipulation schemes that can cause serious harm to both individual investors and financial markets as a whole. To protect against these risks, it is important to be informed, proactive, and use common sense when making investment decisions.