Bittrex, one of the biggest cryptocurrency exchanges, has announced that it will remove 82 tokens from its trading platform.
Removal of Tokens
The Bittrex team posted this statement regarding the removal of tokens on their website:
See the complete list of coins and tokens removed here
It is not easy for exchanges to sustain a stable order book on leader trading platforms if a cryptocurrency does not have enough liquidity and demand from its users. Lack of liquidity will result to price manipulation as demonstrated by a recent study done by Sylvian Ribes a cryptocurrency trader.
By using a technique called slippage—the process of selling $50,000 worth of a particular cryptocurrency on a trading platform to assess its impact on the price–, Ribes was able to evaluate the liquidity of digital assets on some of the major exchanges such as GDAX and OKEx. Although GDAX had a less than 1% slippage, on OKEx and other cryptocurrency-only exchanges, every slippage led to a 2 to 10% drop in the market value of the cryptocurrencies.
“A bit of wash trading and artificial volume inflation is to be expected in a thoroughly unregulated market. What I did not expect was the magnitude of the fraud,” Ribes said. According to him although many pairs boasted up to $5million volumes, they would set you back more than 10% in slippage, if ever you decide to liquidate a measly $50,000 in assets.
Wash trading and price manipulation is a widespread practice on major trading platforms with low-volume cryptocurrency pairs. The US Securities and Exchange Commission (SEC) has recently warned investors against such fraudulent schemes that are common in the cryptocurrency market.
Scammers often try to lure their victims with the promise of new and emerging technologies. Pump-and-dump and market manipulation schemes are just among a few of them.
Involvement of the US SEC
The US SEC, earlier this month, has called for all cryptocurrency exchanges to either de-list or register ICO tokens to continue providing support for the tokens. A US-based exchange like Bittrex is required to register with the SEC before they process trades involving tokens.
We will continue to see many major exchanges to de-list or remove small cryptocurrencies prone to pump-and-dump schemes and market manipulation in the upcoming months.