Equity, forex and cryptocurrency markets around the world accommodate the exchange of assets worth Billions of dollars between millions of investors and traders. While the former two are strictly controlled through numerous regulatory directives, cryptocurrency markets remain mostly unregulated. This raises several questions about the fairness and transparency of those markets, as they potentially expose investors to toxic flows and predatory traders. To mitigate these risks, several cryptocurrency exchanges take steps to maintain a healthy trading environment through self-regulation. Despite these efforts, market manipulation and abuse remain open problems in cryptocurrency exchanges.
TradeScope will study both misleading cryptocurrency trading practices, and market manipulation that exploits technical details and glitches in the operation of the exchanges. Such techniques are used by predatory traders with deep knowledge of the cryptocurrency market and the exchange’s microstructure to gain an unfair advantage over the other market participants.
Our goal is to shed light on these, often poorly understood, predatory techniques and propose novel mitigation and detection methods. For this purpose, TradeScope will conduct a large-scale study on manipulation in cryptocurrency exchanges. This will enable us to better examine the technical underpinnings of common fairness problems in cryptocurrency exchanges and propose market design improvements that effectively thwart manipulation without affecting price discovery. We anticipate that our findings will be relevant to cryptocurrency exchanges worldwide.