When we talk about spoofing in crypto world, we talk about how the price of Bitcoin and even Ethereum is manipulated by certain trader, group of traders or even the stock market itself .
Spoofy may want to move the bitcoin price up or down as long as there is enough liquidity for it.
Spoofy's buy and sell orders are not intended to be accomplished. Spoofy is faking those orders with the sole intention of canceling them before it is completed. His main goal is to send false signals to other traders and bots so they make a false technical analysis of the market. If anyone goes into his order, his order disappears at the same time.
Spoofing does not even require two separate accounts, but both are controlled by one ''brain''. Orders usually last from 5 seconds to a few minutes, depending on his need.
In order for someone to oppose Spoofy how first, he should put an extraordinary amount of money on the stock market. Also all legal investors in Bitcoin would need then to pay through an unknown broker which is unlikely. Spoofy can be the stock market itself or someone very close. Nobody likes to fight on anybody else's ground.
It is opposite to logic to send 15,000-25,000 BTCs on the stock exchange to fight with the Spoofy.
When writing a system code on a crypto exchange as a first task programer should not allow the execution of contradictory orders from the same account. There is no legitimate excuse or a valid reason why you should be able to trade with yourself, except to manipulate the market. There is no reason why someone would place an order at 20,000 BTC and then pull it back in a short time.
Unfortunately, many crypto exchanges are still unregulated and do not restrict spoofing.
People underestimate how many crypto exchanges actually follow one another. Price manipulation on one directly affects prices elsewhere. Traders usually simultaneously monitor the development of situations on different exchanges. Especially the ones in arbitrage trading. If one place starts to separate with the price, everybody buys at the place where the price is lower. It's not just people but bots, so reaction to price changes can be instantaneous.
This activity could easily be prevented if there is a mechanism that is not allowing retention of orders of a certain size until it passes strict amount of time.
Most of this activity appeared on Bitfinex and sometimes in lesser extent on Gdax.
Such activity was declared illegal in the US Dodge-Frank Reform in 2010.
It is interesting to know those fact because in banking world UBS, HSBC and Deutsche Bank were just fined with millions of dollars each for "spoofing" and former traders at the banks, as well as individuals at other firms, were charged. They were manipulating in the U.S. futures market in metals and equities futures.
