A "whale trap" in cryptocurrency trading refers to tactics employed by major investors (known as "whales") to manipulate the market for their benefit. This strategy often involves creating misleading signals to mislead smaller traders. Here are a couple of common methods:
1. **Pump and Dump**: Whales may buy up large quantities of a cryptocurrency to drive up its price, enticing smaller investors to purchase in anticipation of rising values. Once the price has reached a high point, the whales sell off their assets, causing the price to plummet and leaving smaller investors with losses.
2. **Fake Sell Walls**: Whales may place substantial sell orders at a specific price level, creating the appearance of significant selling pressure, which can lead to a price decline as smaller traders panic and sell their holdings. The whales then cancel their sell orders and purchase the now cheaper coins.
In both cases, the objective is to exploit the market fluctuations they create, reaping profits at the expense of less experienced traders.