Abstract
The rise of cryptocurrencies like Bitcoin has disrupted traditional financial markets and presented new challenges for regulatory oversight. This study examines trading patterns and behaviors in cryptocurrency markets to understand the implications for regulation. We analyze a dataset of over 1 million cryptocurrency transactions across major exchanges from 2017-2022.Several key findings emerge from our analysis. First, we detect evidence of widespread price manipulation tactics like spoofing, ash trading, and pump-and-dump schemes across many cryptocurrencies. Second, we identify periods of extreme price volatility and leverage that leave markets vulnerable to destabilizing events. Third, we find high concentration of wealth among a small number of anonymous wallet addresses.We discuss various regulatory measures that could improve transparency, stabilize markets, and deter illicit behavior. These include mandated identity reporting, limiting leverage, real-time auditing and surveillance, and coordinated global regulatory frameworks. Policymakers must act urgently to get ahead of risks as the adoption and market capitalization of cryptocurrencies continues growing rapidly. This study provides an evidence base to inform appropriate regulatory policies.
Keywords: Cryptocurrencies, Bitcoin, Trading patterns, Market stability, Financial system integrity, Transparency etc.
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