A sudden drop in the cryptocurrency market often indicates a strategy known as a "whale trap." This method is used by large investors, or "whales," who have the financial power to influence market trends in their favor. Hereâs how this strategy usually unfolds:
1. **Massive Sell-Off**: A whale initiates a large-scale sell-off, creating panic among smaller investors. As the price plunges, retail traders start selling their assets, fearing even greater losses.
2. **Ripple Effect**: As more investors join the sell-off, the downward pressure increases, causing prices to fall even further. This panic selling creates a snowball effect, accelerating the market decline.
3. **Reaccumulation**: Once prices have dropped to a low point, the whale reenters the market, buying assets at a discounted price. This move boosts the marketâs momentum and allows the whale to accumulate more holdings at a lower cost.
This tactic takes advantage of emotional responses, pushing less experienced traders to sell while allowing the whale to acquire assets at cheaper prices. Itâs a common pattern in unregulated and volatile markets, especially in cryptocurrency, where such manipulation often goes unchecked.
