There are many different strategies used by the major crypto markets’ participants.
Crypto whales are people or institutions that hold massive amounts of a particular cryptocurrency. Both marvelled and feared upon in equal measure, crypto whales move around the crypto space resulting in huge waves at every turn.
Many crypto whales tend to be anonymous investors, exchanges or hedge funds which are only identifiable via public addresses. A great example is Satoshi Nakamoto, the mysterious developer of Bitcoin’s protocol, who is thought to own not less than a million Bitcoin.
The cryptocurrency market is relatively new as compared to regular trading markets which are more mature in the financial industry. Therefore, crypto enthusiasts need to identify the strategies used by different types of crypto whales to identify any unusual trends. Today, CryptoLists bring up facts about these strategies:
+FUD (Fear, Uncertainty and Doubt)
+Pump and dump
Fear, Uncertainty and Doubt
Fear, uncertainty and doubt are some of the most effective strategies used by crypto whales to move the prices of crypto assets without buying or selling a single coin. New traders and investors are often shaken up when they receive negative news and tend to find the fastest way out. Since they dislike incurring even minor losses, when fake narratives or half-truths are published regarding a specific project, you can notice a significant price impact.
The crypto space is filled with garbage news aplenty from third-tier media and influencers. This makes it harder for the average trader to identify fake news. Therefore, it’s important to critically analyze narratives and news or use reliable crypto news platforms such as Crypto Lists before making any financial decision regarding your crypto investment.
Pump and Dump
One of the most pervasively used strategies in the crypto industry is pump and dump, and it also has one of the most significant impacts. Here, insiders as well as other key market participants try to pump up the price of a coin until it gains wide attention. Once myriads of investors join the market, the group dumps that coin to make a reasonable profit.
This strategy was initially used with penny stocks; but presently, low liquidity altcoins are the best fit in the crypto space. A low-value altcoin can be easily pumped whereby the manipulation is coordinated by a group of individuals who come together to hatch the plot.
Another nefarious strategy deployed by cryptocurrency whales is stop hunting – hunting for every stop-loss milestone. The objective of this strategy is to force action from the market traders out of their positions by pushing the price to be low enough to trigger their predetermined stops. The intention here is to repurchase the assets at a lower value after the hands of multiple participants have been forced out.
A significant portion of investors set their stops at specific technical levels and these levels indicate the main capitulation levels showing the whales on which levels to attack when driving the market down. Since cryptocurrency markets operate 24/7, unaware investors will wake up to realize that their stops were triggered and the prices have reverted to what they saw last, but they have lost their positions.
Previously known as book spoofing, this strategy is mainly prevalent in Bitcoin cycles, but still occurs on shady crypto exchanges. It’s a strategy where a market participant places an enormous set of orders without any intention of having them executed. The objective here is to create an illusion that there is a massive supply or demand in that market.
For instance, on June 19th, 2021, about 79,000 BTC were moved by bitcoin maximalists to Coinbase to create a sell wall and force a downward price. This strategy drove down the price of BTC from around $32,000 to $30,000. New investors panicked and sold, but the majority of them were picked up by small buyers.
Wash trading is identical to whale walls and it’s used to form an illusion of an active marketplace for a particular asset. This strategy entails purchasing and selling the same crypto-asset simultaneously by a single person projecting a false volume. Many investors tend to analyze the liquidity and volume of a crypto asset before they join the band and realize liquidity false alarms – that is when wash trading prevails and those behind the strategy take advantage of the yield farming.