Recent orders placed on exchanges in excess of USD 50 million have raised the question amongst some cryptocurrency traders – is Spoofy back?
Spoofy is the name given to an individual, or group of traders, that in August last year was identified as being able to manipulate the price of bitcoin through excessive buy orders. In order to achieve the manipulation, the entity would have to have an almost limitless amount of capital – large enough to put in buy orders that could essentially control the market.
The name Spoofy comes from the term spoofing which is defined by the Dodd-Frank act as “Bidding or offering with the intent to cancel the bid or offer before execution.”
The idea is that other traders will see the orders and make knee-jerk decisions based on how they think it will affect the market. If enough traders react in panic, the market moves in the direction the spoofer wants it to, and then he cancels his order and takes advantage of the price change. In regular trading spoofing is illegal, but in the unregulated cryptocurrency market, many believe it is often used as a means of manipulation.
“Spoofers bid or offer with intent to cancel before the orders are filled. The flurry of activity around the buy or sell orders is intended to attract other high-frequency traders (HFT) to induce a particular market reaction such as manipulating the market price of a security.”
Bitcoin blogger and self-proclaimed fraud-buster Bitfinex’d allegedly exposed Spoofy in August last year, during which time Bitcoin was experiencing excessive volatility. At the time the price of bitcoin was around USD 3000, and the Bitfinex exchange was experiencing troubles with banking regulation.
As a result of an offer by the Bitfinex exchange to credit Bitcoin Cash (BCH) tokens following a lack of support from other exchanges, a method to wash trade the tokens emerged and people were able to get free BCH tokens. Through alerting people via Twitter of the wash trading and manipulation, Bitfinex’d finally got the Bitfinex exchange to admit the problem and sanction the traders.
Despite the sanctions, further manipulation continued after that, and some speculate that Tether (USDT) tokens were used to bring about the huge rally that saw bitcoin reach nearly USD 20,000 in late December last year before eventually crashing. Investigations since then have brought better regulation to exchanges and relative calm to the market. As a result, it seems that whoever Spoofy was, they may have disappeared.
Is Spoofy back?
These days, rather than being considered a specific individual, the term Spoofy is used in a more general sense to refer to any large orders that are placed on exchanges. Recent walls created by huge buy orders on various exchanges have created speculation amongst some high profile cryptocurrency traders on Twitter.
Richard Heart (@RichardHeartWin) pointed out that somebody was making USD 50 million orders and linked to data from bitcoinity.org website. @AureliusBTC posted an image showing a list of huge buy orders with the simple tweet ‘Spoofy is back.’
Other traders including Reina Nakamoto (@mindstatex) and @TommysTollbooth have also mentioned Spoofy in recent tweets.
According to Bitfinx’ed, Spoofy shows himself when “The price is falling too fast, spoofy then places up large bids which trigger a recovery.” Considering the recent collapse of Bitcoin to near USD 6000, it’s understandable that some may be asking the question – is Spoofy back?
While manipulation is generally not considered good for markets, if last year is anything to go by the return of Spoofy could mean a potential boost for bitcoin in the near future.
Mark Hartley is an IT specialist, freelance writer, keen traveler, and blockchain enthusiast. He has worked on the trading floors of the world’s biggest interdealer broker in London and helped integrate crypto-services into IT trading systems. When he’s not searching for the world’s most beautiful beach, he’s nose deep in any crypto and blockchain related news.