5 Ways How Centralized Exchanges Impact Crypto Price Stability

How Centralized Exchanges Influence Crypto Markets

In a recent statement, Arthur Cheong, founder of DeFiance Capital, voiced concerns over centralized exchanges ignoring market manipulation by market makers, warning that such practices contribute significantly to the unstable pricing of cryptocurrencies.

The Disturbing Reality of Price Manipulation

Cheong noted that without addressing these issues, a substantial portion of the crypto market may remain “uninvestable” for the foreseeable future.

Understanding the Issues Surrounding Price Manipulation in Crypto

The recent statements by Arthur Cheong, founder of DeFiance Capital, highlight critical challenges within the cryptocurrency market, particularly regarding how centralized exchanges impact crypto price stability. Historically, the crypto landscape has been marred by instances of price manipulation, with events such as the infamous 2017 ICO boom demonstrating how easily market dynamics can be distorted.

Cheong’s remarks point to a troubling trend where centralized exchanges (CEXs) appear to overlook the collusion between market makers and crypto projects. This negligence fosters a marketplace analogous to a ‘lemon’s market,’ where subpar assets thrive at the expense of genuine opportunities. As noted by analysts, the overwhelming majority of tokens listed on platforms like Binance have seen drastic declines, leading to skepticism among retail investors.

Moreover, the recent AWS interruptions affecting major exchanges have exacerbated existing vulnerabilities, causing further instability. If exchanges continue to ignore these manipulative practices, the outlook for potential investors remains bleak, solidifying concerns about how centralized exchanges impact crypto price stability. Without urgent reforms, the crypto market could remain widely uninvestable, depriving it of necessary trust and engagement.

How Centralized Exchanges Impact Crypto Price Stability

Arthur Cheong, the founder of DeFiance Capital, recently highlighted a pressing issue in the cryptocurrency market: price manipulation facilitated by centralized exchanges (CEXs). Cheong’s statements reflect growing concerns about how centralized exchanges impact crypto price stability, suggesting that manipulation by market makers and exchanges is significantly distorting the market. He noted, “If the industry’s players don’t step up, a big part of the crypto market will remain ‘uninvestable for the foreseeable future.'”

The Distortion of Token Prices

Cheong criticizes CEXs for turning a blind eye to the collusion between market makers and crypto projects that leads to artificially inflated prices. He referred to the altcoin market as a “lemon’s market,” indicating that low-quality products are driving out good ones due to information asymmetry. This concerns many investors, especially as data shows that from the tokens listed on Binance this year, a staggering 88% have depreciated. According to crypto analyst Miles Deutscher, only 3 out of 27 tokens are performing positively, with price drops extending from 19% to 90% post-listing. He stated, “Anyone that bought is down massively.”

Investors are Quitting

This situation has led to a significant decrease in retail investor confidence. Cheong’s comments resonate with fears that current token generation event pricing is an “absolute joke,” particularly as it often results in losses within just months of listing. A community member voiced concerns echoing Cheong’s, remarking on the industry’s troubling state. As Binance co-founder Changpeng Zhao acknowledged earlier, the listing system requires reform; he proposed automating listings to enhance price stability akin to decentralized exchanges (DEXs).

Impact of Centralized Exchanges on Crypto Price Stability

The recent comments from Arthur Cheong, founder of DeFiance Capital, underscore a critical concern within the cryptocurrency industry: the manipulation of prices facilitated by centralized exchanges (CEXs). Cheong argues that market makers are colluding with CEXs, leading to artificial pricing that not only frustrates investors but also raises questions about the integrity of these platforms. This scenario is particularly concerning for retail investors who find themselves in a “lemon’s market,” where low-quality tokens dominate, severely impacting market trust.

As Cheong pointed out, if centralized exchanges continue to overlook these manipulative practices, it could render a significant portion of the crypto market “uninvestable.” Such assertions highlight the urgent need for regulatory scrutiny and enhanced compliance from exchanges. For the audience, especially investors, understanding how centralized exchanges impact crypto price stability is paramount. If high-profile exchanges like Binance fail to reform their listing processes, they risk alienating retail investors, which could stifle growth in this already turbulent market.