The market is becoming increasingly complex, and there's nothing new in the world of investing that can't be manipulated. However, as сhanges in our global economy are accelerating every day, blockchain technology may just provide a solution as it offers a decentralised system to record transactions on a digital ledger.
The creator of Ethereum, Vitalik Buterin, has said that blockchain technology will flatten the hierarchy in the finance sector by replacing intermediaries such as brokers or banks with self-serving software algorithms.
(A representation of how blockchain technology can be used in finance: Zignuts Technolab)
If he's right and history repeats itself, we'll soon find out if technological innovation still has what it takes to stem the tide of human greed. But, in the meantime, will the super-rich use blockchain technology to manipulate markets? It's certainly not impossible that they could, and at least one billionaire has already announced his intentions.
As we know, Elon Musk's tweets can cause skyrocketing increases in shares and send a flood of investors to crypto. In addition, his announcement to acquire Twitter in a $44bn takeover could give him the power to manipulate markets like we have never seen before. The new digital era can make manipulation look effortless. A simple tweet is all it takes.
However, in recent days, a lawsuit has been filed against Musk for delaying the disclosure of his take over stake in Twitter which is claiming that he is misleading the 95m followers of Twitter, with arguments that Musk's "false statements and market manipulation have created chaos,"
Will blockchain technology stop billionaires from "playing markets"?
The New York Times published an article about the possible manipulation of cryptocurrency markets via blockchain technology. Blockchain is a technology that allows digital information to be distributed but not copied. The most well-known use of blockchain technology is associated with the digital currency Bitcoin.
What's not so widely known is that major banks are also beginning to draw up plans for how they can use blockchain technology for transactions and record-keeping, especially as mobile banking increases thanks to its ease of use and high performing devices. Even hedge funds are looking into ways in which they can quickly capitalise on these new developments.
Some billionaires have claimed they intend to leverage blockchain technology to сontrol market manipulation. However, they don't worry about the impact that this will have on the markets as "the game is rigged anyway".
Surprisingly, traditional equities traders, who are believed to be highly paid and overpaid, turned out to be in the lowest-paid tier of the industry. Many hedge fund managers make 1% of the funds they manage in a year.
(Image Source: Visual Capitalist)
The super-rich has always had an impact on markets via the use of large sums of private capital. However, cryptocurrencies and blockchain technology have opened up a whole new world for them to potentially manipulate markets. Unfortunately, we might all just be pawns in their game once again.
Investors are constantly trying to catch how the wealthy manipulate markets in order to gain significant returns on their investments. For example, during the past four decades, U.S. equity markets are about 9% higher than they would have been if a few large investors hadn't been active. The top 10% of wealthy investors control 80% of all stocks, bonds and mutual funds in the United States; they own more than 90% of all financial assets in most countries.
A study by Michael Cembalest and others found that from 1963 to 2012, the percentage of U.S. household wealth owned by the top 0.5% increased from 7% to 22%. Their analysis also showed that the top 0.1% of households own 33% of all U.S. financial wealth, while the bottom 90% of households possess 22%.
Cryptocurrencies are often talked about as the "precursor" to the blockchain, but that's not entirely accurate. There's a growing amount of evidence that cryptocurrencies are here to stay and could eventually be used for many different kinds of transactions. This is happening because blockchain technology is so good at decentralising trust and transparency – even if it doesn't yet seem evident to everyone.
An increasing number of business people and government officials have expressed their interest in cryptocurrencies for several reasons. Not only does it come with blockchain technology which is transparent, ist creates a new digital financial infrastructure that is not controlled by a specific body which therefore could be hard to manipulate. However, Bitcoin’s price volatility, which affects many other coins, has been one of the primary criticisms levelled against digital currencies since they were created. Still, with the advent of blockchain technology, it could become much less obvious why this is such an issue.