Manipulations with trading volume pose a serious challenge to crypto market. You probably know that when you see those billions of dollars in trading volume with some mediocre coins, you can easily divide those numbers by at least 10 in your head. Today we will highlight the major drawbacks of the new type of "mining" presented to the market not so long ago - Trade-To-Mine coins (ToM) as exampled by ABCC exchange with its native token - AT. Hopefully, most of your questions will be answered 👇
You've probably noticed in the summer when some small- or medium-scale exchanges, sometimes, outright no-names all of a sudden took the leading positions in terms of daily trading volume - Coinbene, Bitforex, Bit-Z, Fcoin surpussing even Binance, Huobi, and OKEx. There's no way it could have been triggered by a natural growth in trades number or the influx of new traders. Those exchanges simply used the Trade-to-Mine model whereunder they paid out for every transaction with their native tokens.
This model has been under harsh scrutiny and criticism by the crypto community because traders simply processed the deals in order to gain the tokens and sell them right away. What it can potentially lead to?
More often than not, such situation is a perfect spot for malicious manipulation of the market and currencies' exchange rate. In such conditions, traders are incentivized to either buy a coin a lot of times, or, in reverse, sell it and thus dump the coin's price. Such model is not a way for a trader to earn money.
The core understanding of all coins' dumps is that the easier it is for a person to obtain a token, the lower its price will be. People are always willing to sell something they've got for free at any price, even the lowest one.