A sudden drop in the cryptocurrency market often indicates a phenomenon known as a “whale trap.” This tactic is used by influential investors, or “whales,” who have enough capital to tilt the market’s momentum in their favor. Here’s how they typically execute this strategy:

1. Massive sell-off: A whale triggers a major sell-off that causes widespread panic among smaller investors. Seeing the price plummet, retail traders begin dumping their holdings, fearing further losses.

2. Ripple effect: As more investors rush to sell, the downward pressure intensifies, causing prices to fall sharply. This panic-induced sell-off creates a snowball effect, driving the market lower.

3. Re-accumulation: Once the market bottoms and prices are low enough, the whale returns, buying assets at a discount. This move restores the market’s momentum and allows them to increase their holdings.

This tactic is designed to capitalize on emotional reactions, shaking out less experienced traders while allowing the whale to acquire more assets at favorable prices.This is a familiar pattern in unregulated and highly volatile markets, especially in the crypto space, where such manipulation often goes unpunished.

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