A "whale trap" refers to a situation where large holders of a cryptocurrency, known as "whales," manipulate the market to lure smaller investors into buying, only to then dump their holdings and cause the price to crash. This sudden dump can lead to significant losses for those who bought in during the manipulated price rise.
Here are a few signs to watch for to avoid getting caught in a whale trap:
1. **Unusual Price Movements:** Rapid and unexplained price increases.
2. **High Trading Volume:** A sudden spike in trading volume that doesn't match the usual activity.
3. **Order Book Analysis:** Large buy orders that suddenly appear and then disappear.
4. **Social Media Hype:** Increased chatter on social media platforms promoting a particular cryptocurrency.
5. **Market News:** Sudden news releases that seem too good to be true.
If you suspect a whale trap, it's often best to exercise caution and avoid making hasty investment decisions based on sudden market movements.