2 Simple Ways Crypto Whales Manipulate the MarketMay 30, 2018
What is a crypto whale? The term “whale” is something you may have heard at least a few times if you’re involved in the cryptocurrency community. A whale is typically a high net worth individual that puts a large amount of their funds into cryptocurrencies.
Their significant funds allow them to change the market trend in whatever direction they want. They can make it go up, down or trade sideways while they are loading up for the next pump. Let’s take a closer look and do some whale watching.
We will examine if there is a rhyme or reason to their manipulative behavior and tactics in the market. We will also examine what their tactics look like and how these tactics cause price gains and losses for the average trader.
Legend of “BearWhale”The first notable whale incident with Bitcoin dates back to 2014. The infamous whale dubbed “BearWhale” decided to put up his entire position of 30,000 BTC up for sale. He later said he did this so he could capitalize on his investment gains and retire.
He put an order limit for 30,000 BTC in to be sold at $300. He realizes now he could’ve made more money if he would’ve worked on a better sell off strategy for his Bitcoin position. Instead of having a sound selloff strategy, he put up a massive wall with his large 30,000 BTC sell order.
This sell order caused a considerable stir in the Bitcoin community. Nearly everyone was worried that there was a larger conspiracy to lower the price of Bitcoin permanently. Everyone fought hard and successfully absorbed his entire sell order.
Price SuppressionIn contrast to BearWhale, some other whales have since then created waves in some crypto-markets, with much more strategic motivations. They can control the price of coins because there is still a relatively low volume of traders in the crypto markets.
The more substantial and more frequent amounts money funneled into the market, the harder it will be for whales to manipulate the market as quickly as they are right now. They can suppress the price of coins in a pretty straightforward way.
Let’s say the whales know that an impactful announcement will come soon or they want to load up on a coin in a specific price range so they can have an even more significant position than they do right now. All they need to do is to put a massive sell order on the books that is lower than all of the other sell orders in the market.
This large order will force the other sellers to lower their price so they can sell their orders before the whale’s sell order. The whale can then further reduce the enormous sell order price forcing all of the other sellers to drop their selling price even lower than before.
These events then set off a bit of panic chain reaction in the market. The whale will then pull their large sell orders off of the market when they’ve created enough panic, and the price is where they wanted it to be so they can accumulate more coins at their desired price point. This tactic described above is known as a “sell wall.”
Price PumpingIf the whales want to artificially inflate the price of a cryptocurrency all they need to do is the opposite of a sell wall. They put huge buy orders on the market at higher prices than what is on the market. This buy order then forces bidders to raise the price of their bids so the sell orders fill their buy orders.
If executed correctly this can cause FOMO for smaller investors and drive up the price significantly. This pump tactic requires significant amounts of capital that aren’t required to pull off a sell wall successfully. So a group of whales need to do this together in order to execute this tactic successfully.
ConclusionIf you can learn to successfully whale watch, you will be able to trade the way they do and make higher returns.
It’s also essential to “hodl” strong if they are trying to make the price drop. Otherwise, you will feed the whales your position at a discount and give them even more leverage in the future to manipulate the market further.It is important to note that these tactics are illegal in the regulated stock market exchanges. As the cryptocurrency world faces more regulations as time goes on, It is safe to say that the whales will eventually lose their power to manipulate the market so readily and easily.https://medium.com/formosa-financial/2-simple-ways-crypto-whales-manipulate-the-market-35ba10bc07f7