Whales, in the context of cryptocurrency, are individuals or entities that hold large amounts of a specific cryptocurrency. They can manipulate the market by using their significant holdings to influence the price through tactics like *pumping* and *dumping* or *spoofing*. Here’s how they typically manipulate the market and what traders can do to protect themselves:
**Whale Manipulation Tactics**
- **Pump and Dump**: Whales artificially inflate the price of a cryptocurrency by buying large amounts (pump), encouraging smaller investors to follow suit. Once the price rises, they sell off their holdings (dump), causing the price to crash, leaving the smaller investors with losses.
- **Spoofing**: Whales place large buy or sell orders to create the illusion of demand or supply, without intending to execute those trades. This misleads smaller traders into reacting to perceived market movements. Once the price shifts, the whale cancels the orders.
- **Stop-Loss Hunting**: Whales push the price down momentarily to trigger stop-loss orders set by smaller traders. Once the stop-loss orders are executed and the price dips further, the whales buy back at a lower price.
Taking a cautious, long-term view with sound risk management can help avoid the negative effects of whale manipulation in the market.
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