Here we explain what front running is and if you’re a crypto trader, how you can play safe.
As the prices of Bitcoin and Ethereum skyrocketed in the past few months, the decentralised cryptocurrency market saw a massive influx of new traders, especially stock market traders, who migrated to the cryptocurrency market— in a bid to book profits.
What also moved with them are some traditional day trade strategies used in stock markets, which include breakout tactics to scalping (trading in small price movements without targeting massive profits). But one stock market tactic in particular that has proven popular for intra-day crypto traders is “front running.
Front runners are abusing cryptocurrency exchanges by soaking hundreds of millions in crypto from trader transactions on the Ethereum network.
Here we explain what front running is and if you’re a crypto trader, how you can play safe.
Front running is when a trader takes advantage of an insider ‘tip’ or knowledge about a future transaction that is about to substantially affect the price of a crypto coin.
So essentially the traders buy or sell a crypto coin based on advance, non-public knowledge or information that they believe will affect its price. That information is not yet public, giving the trader an advantage over other traders, and the market at large. In fact, front running is a form of insider trading and market manipulation.
