How Do “Wash Trading” and Other Manipulative Practices in Crypto Markets Interfere with the Execution of Iceberg Orders?

Wash trading, where an entity trades with itself to create fake volume, distorts the true liquidity of the market. An institutional trader might place an iceberg order believing the market is liquid, only to find their order is interacting with fake volume, leading to poor fills and revealing their intentions to manipulators.

Other practices, like spoofing, can create false signals of supply or demand, tricking the iceberg algorithm into executing at unfavorable prices. These activities degrade the market data that iceberg execution strategies rely on.