Of course you can manipulate the market. You put up a huge fake wall just above the lowest ask. Real traders who want to sell will set their price below the wall. You move the wall down a little, the sellers match that movement and adjust their prices down a little to stay under the wall, rinse and repeat. The result is that you manipulate the price downward. Then when you've moved the price a decent amount, you buy cheap, remove the wall, watch the price go up again and sell your bitcoins at a profit. How can you say this is totally fine?
..but then again, I place my orders according where it looks like I should place them on the chart and mostly ignore the orderbook. As I said: There is such a thing as
hidden orders on Bitfinex and the minimum size for placing them is only 100 BTC.
From their FAQ:
What is a "Hidden order"?
A hidden order is an order which does not appear in the orderbook, and thus doesn't influence other market participants. See the fees page for minimum size and fee applicable.
Right there they're saying that large orders can influence the market. Intentionally influencing the market (as in the case of fake walls) is manipulating it. And why would they have an orderbook at all if it's not reliable? I still say that being able to put up orders on the exchange for funds you don't have is faulty design.