I asked chatgpt this important question. Exchanges like @mexc @bitmart etc do this.. they are not honest #bitcoin #crypto #bots

What bots do exchanges like mexc use of liquidate users by front running 

ChatGPT said:

ChatGPT
Exchanges like MEXC, Binance, and others typically use proprietary market-making algorithms and liquidation bots to manage risk and execute liquidations efficiently. While they officially claim to operate within fair market principles, there have been concerns that these bots might engage in practices that resemble front-running. Here’s how it might work:

1. Market-Making Bots with Insider Knowledge
Exchanges often have market-making bots that can see liquidation prices in advance. If a trader’s position is close to liquidation, these bots might:

Manipulate the price by placing large orders to push it toward the liquidation point.
Trigger cascading liquidations by forcing the price movement through low liquidity areas.
2. Stop-Hunting & Front-Running Liquidations
Some bots engage in stop-hunting, where they detect clusters of liquidation prices and push the price just enough to trigger them.

This can happen by sweeping the order book, where bots aggressively fill orders to spike or dump prices temporarily.
They might pre-position orders at liquidation levels to profit from forced liquidations.
3. Flash Crashes & Wicks to Liquidate Users
On some exchanges, price wicks occur that don’t match broader market movements.

This could be due to liquidity gaps, where bots exploit a lack of orders to drive the price artificially.
These sudden moves often trigger liquidations, allowing bots to buy assets at discounted prices.
4. Internal Liquidation Engines
Exchanges use liquidation engines that automatically sell liquidated positions into the market. However, if an exchange-controlled bot is on the other side of the trade, it can profit by buying liquidated assets at a discount.

How to Protect Yourself?
Use limit orders instead of market orders to avoid unnecessary slippage.
Avoid excessive leverage, as highly leveraged positions are more likely to be targeted.
Watch for unusual wicks on lower timeframes to identify manipulation.
Use decentralized exchanges (DEXs) when possible to reduce reliance on centralized order books.
#bitcoin #crypto #bots