You dare to say that Bitcoin has no manipulation, and you dare to say that major exchanges are not colluding to control the price?!! I am often questioned and interrogated by some smart people about such questions.
Let me explain some hedging and arbitrage methods in the financial market:
Cross-period hedging and arbitrage: This money-making method takes advantage of the price differences of the same variety in different delivery periods, including the differences between futures and spot prices. If the futures price is higher than the spot price, it is commonly known as "contango," and if the futures price is lower than the spot price, it is called "backwardation." Similarly, there will also be differences in prices between different delivery periods. When the difference is large enough, one can short in the high-priced market and simultaneously take an equal long position in the low-priced market, locking in profits in an instant. This behavior also stabilizes the prices of spot and futures and different delivery period prices, and is an indispensable behavior in mature markets.
Cross-market arbitrage: This involves hedging and arbitrage using price differences between different exchanges, which requires high-frequency trading robots. If a price difference of more than 2% is found between two exchanges, arbitrage opportunities arise. The robots execute trades at the millisecond level, ensuring risk-free arbitrage. During the period from 2019 to 2021, the well-known Plus Token operated based on this concept. However, with too many arbitrage robots from various parties, there are no longer any price gaps, and the profits from arbitrage are not enough to cover the cost of servers. The result of the widespread operation of robots that detect price deviations between different exchanges at the millisecond level is the rapid convergence of Bitcoin prices on major exchanges, so there is no collusion among exchanges or the existence of large institutional players.
As for small exchanges, even the K-line of Bitcoin on second-tier exchanges is almost identical to that of mainstream exchanges. This is because these second-tier exchanges have poor liquidity and no arbitrage robots operating on them. Why are the prices the same? This is because these exchanges directly average the prices of several mainstream exchanges and directly "feed" the price to customers. The exchange's robots engage in a match against customers in the order book. To control their own risks, these exchanges usually use a "front-running mode," where both the first and second sell orders are placed by the exchange's robots. When a customer buys at market price or places an order higher than the second sell order, the exchange's robots immediately cancel the first and second sell orders. As a result, the customer actually executes the trade at the third sell order or even higher. This loss is known as "slippage," which is an important source of income for small exchanges. At the same time, if the exchange loses in this match against customers, they may even delete profitable orders from customers or restrict withdrawals, which is the main reason why I do not trade on second-tier and lower exchanges!
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