How whales manipulate the cryptocurrency market
The cryptocurrency market is highly volatile and the market size can be relatively small compared to traditional markets, making it easy for whales, individuals or institutions that own large amounts of cryptocurrencies, to influence the market to make huge gains. Here are the most prominent ways whales manipulate the market:
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1. Spoofing
Whales place huge buy or sell orders on the trading platform, without any real intention of executing them. These fake orders lead to:
Stimulate panic or greed in other traders.
Causing artificial price movements.
Then, the orders are cancelled before they are executed, but after the market has moved in the direction the whale wants.
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2. Pump and Dump Techniques
Pumping: A whale buys large amounts of a low-value cryptocurrency, causing its price to rise dramatically.
Dump: After attracting small traders into the market due to the rapid rise, the whale sells his holdings all at once, leading to a price collapse and huge losses for other traders.
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3. Wash Trading
The whale repeatedly buys and sells the same currency between his own accounts to create the illusion of high liquidity.
Objective: To attract traders by making them believe that the currency has strong trading activity and increasing popularity.
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4. Manipulation through news and rumors
Whales spread misleading news or rumors that affect traders' emotions.
Examples: Spreading a rumor about an alleged partnership for a particular project with a large company, or news about legal regulations affecting the market.
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5. Bear Trap
Whales sell huge amounts of cryptocurrency to push the price down, which prompts other traders to panic sell.
After the drop, whales buy back the coin at a lower price and profit from its subsequent rise.
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6. Exploiting the lack of information
Some newer or lesser-known cryptocurrencies are poorly regulated, making it easy for whales to manipulate them.
This is done by buying huge amounts of the currency to raise its value and then selling it before the project or price collapses.
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How to protect yourself from whale manipulation
1. Avoid making decisions based on emotions: Don't let greed or fear control your investment strategy.
2. Analyze the market objectively: Use data analysis tools to identify abnormal movements in prices or liquidity.
3. Diversification: Don't put all your money in one currency, spread your investments out to reduce risk.
4. Continuous learning: Be aware of the techniques whales use to avoid falling victim to them.
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Conclusion
Whale manipulation is a reality in the cryptocurrency market, but with a deep understanding of the market and well-thought-out trading strategies, traders can minimize the impact of these practices on their investment decisions. Awareness and vigilance remain traders’ most important weapons to face these challenges.