A "whale trap" in cryptocurrency trading refers to a strategy used by large investors (called "whales") to manipulate the market in their favor. This tactic involves creating a false impression of market activity to deceive smaller traders. Here are a few ways it can work:
1. Pump and Dump: Whales may buy a large amount of cryptocurrency to drive the price up, encouraging smaller investors to buy in, fearing they will miss out on profits. Once the price is high enough, whales sell off their assets, causing the price to plummet and leaving smaller investors with losses.
2. Fake Sell Wall: Whales can place large sell orders at a specific price, creating a "sell wall." This can make it seem like there is significant selling pressure, causing the price to drop as smaller traders panic sell. Then, the whales cancel their sell orders and buy back the coins at a lower price.
In both scenarios, the goal is to take advantage of the market movements they cause, profiting at the expense of smaller, less experienced traders.
