3 ways traders can avoid trading tokens with manipulated volumes

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Order book depth, free market capitalization and gaps in trading volume typically indicate artificial volume. Cointelegraph shares a few possible examples.

) and cryptocurrencies is essential for traders aiming to avoid being surprised by sudden sharp declines in low volume.

Additionally, these entities often enjoy benefits like reduced trading fees or access to tokens not available to the public, enabling them to sway market conditions to their advantage. But regardless of how deceitful and savvy those entities are, there are three solid indicators that essentially provide some warning sign, allowing experienced traders to detect anomalies and avoid getting stranded on tokens that end up crashing as soon as a decent-sized sell order enters the market.

It’s also critical to assess trading volumes in relation to the free market capitalization, which represents the total tokens available for trading. When daily volumes consistently exceed 30% of the token's free market cap, it means there’s unusual activity. This alert should be disregarded in the first two trading days after a new listing, as it typically reflects hype and genuine interest, especially when listed for the first time at major exchanges.

 

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