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One of the major challenges faced in financial markets, whether in traditional stock exchanges or in digital currency markets, is the presence of inexperienced traders. These participants, often influenced by emotions and short-term movements, end up becoming vulnerable to the strategies of large investors, which perpetuates cycles of price manipulation.
There are two main classes of investors in the market:
Large (or institutional) investors: These structure their portfolios strategically and, once completed, make movements that directly influence asset prices, generally causing an upward trend.
Small and inexperienced (or minority) investors: This group, attracted by the recent rise, enters the market by buying assets that large investors are willing to sell.
After this movement, large investors often abruptly liquidate small batches of their portfolios, which generates selling pressure in the market and the consequent devaluation of prices. Faced with this drop, inexperienced investors, overcome by fear, end up selling their assets at low prices to avoid greater losses. At this point, large investors return to the market, gradually acquiring assets at reduced prices and restarting the cycle. This pattern of behavior, known as "cyclical manipulation", favors large investors and penalizes small investors, who act without strategy and based on emotions. To break this cycle, it is essential that smaller investors adopt a rational and planned approach. By making more careful movements, they force large investors to buy at times of high prices, which can contribute to a sustained appreciation of the assets. Therefore, investing wisely and with discipline is essential to minimize risks and avoid falling victim to predatory strategies in the financial market.
