Author: DWF Capital
A comprehensive understanding of how market makers harvest retail investors throughout the entire process has been exposed as 'collectible-level dry goods'.
Major players are best at manipulating two emotions: greed and fear. They create fear to make people abandon their chips for accumulation, then use people's greed to sell the collected chips. However, major players are not omnipotent creators; they cannot completely ensure the success of their actions, and they need to test market sentiments. For instance, in the accumulation phase, have all the sell orders been fully absorbed? Major players fear that when they think they have absorbed all the sell orders and start to lift prices, new sell orders emerge, causing prices to hit new lows, and the previous shakeout fails - for this, they need to conduct supply testing. What about the distribution phase? Major players fear that when they drag prices back to previous high-demand ranges to start filling their warehouses, market demand hasn't been fully satisfied, and prices continue to rise - for this, they need to conduct demand testing.
Analysis → Position building → Market testing → Consolidation → Initial rise → Washing out → Lifting → Selling off → Rebounding → Sell-off → Repeating cycle...
'How do the major players harvest retail investors?'
Major players are best at manipulating two emotions: greed and fear. They create fear to make people abandon their chips for accumulation, then use people's greed to sell the collected chips. However, major players are not omnipotent creators; they cannot completely ensure the success of their actions, and they need to test market sentiment.
For example, in the accumulation phase, have all the sell orders been fully absorbed? Major players fear that when they think they have absorbed all the sell orders and start to lift prices, new sell orders emerge, causing prices to hit new lows, and the previous shakeout fails - for this, they need to conduct supply testing.
What about the distribution phase? Major players fear that when they drag the price back to the previous high-demand range to start filling their warehouses, the market demand hasn't been fully satisfied, and prices continue to rise - for this, they need to conduct demand testing.
Full analysis of the market maker's process:
1️⃣ Preparation phase
Before market makers start to intervene in a certain coin, they will comprehensively collect information on the project from all aspects, including total chip volume, unlocking situation for precise statistics, cost of investors at various levels, chip dispersion, and community enthusiasm assessment, etc.
2️⃣ Position building phase
Market makers will conduct various investigations and research before building positions, covering aspects such as market sentiment, BTC trend in the crypto market, macroeconomic factors, and policy risks.
Methods of market makers selling off
1. Dramatic sell-off
Operational strategy: If a selling pattern appears after a top volume, one must be cautious as the major players continue to sell.
2. Gradual selling
After a series of continuous ups and downs, on a certain day, prices briefly surge, then gradually decline:
If this intraday trend leads to large trading volume throughout the day, it can be confirmed that it is the major players selling off.
3. Use large orders to break through price limits, resulting in a long upper shadow on the daily K-line.
4. Price drop with increasing volume
Price drop with increasing volume mainly refers to a phenomenon where the trading volume increases despite a decline in stock price, indicating the relationship between price and volume. It is a typical short-term price-volume divergence phenomenon.
5. Large volume, wide fluctuations, and large volume
When stock prices rise and fall sharply during the trading day, with bulls and bears repeatedly pulling back and forth, resulting in high trading volumes, the divergence between bulls and bears is already very strong. The larger the trading volume, the lower the probability of a subsequent price increase, as it requires too much capital to lift prices, and stock prices often lose the momentum to rise.
6. Selling during a price increase
During the time when popularity is at its peak, market makers will pre-arrange orders at the upper levels, then, taking advantage of the favorable market sentiment, lead retail investors upwards. When enthusiasm for chasing prices is insufficient, market makers will personally step in to buy several sell orders, pushing prices up for a period, and once retail investors' enthusiasm is stimulated, market makers will stop and let retail investors take over.
The methods of market makers for building positions mainly include the following:
🔶 Negative news accumulation: Using negative news in the crypto space, such as project technical failures or rumors of stricter regulations, to drive down the coin price, triggering panic selling, thus accumulating chips at lower prices.
🔶 Trap for inducing selling: By using technical methods to create an illusion of falling coin prices, retail investors are induced to sell, while market makers buy at low prices to complete their accumulation.
🔶 Large volume accumulation: Concentrating funds to buy the target coin in large amounts within a short period, pushing up trading volume, attracting follow-up traders, and secretly collecting chips.
🔶 Rebound accumulation: In the rebound phase after a price drop, gradually buy in, using some investors' psychology of breaking even or taking profits to expand positions.
🔶 New project ambush: When the target coin's related project anticipates a major technical upgrade, new application scenarios, or strategic cooperation, early positioning and building up positions occur.
3️⃣ Testing the market phase
However, testing the market isn't a mandatory option. Some market makers, relying on keen market intuition and rich experience, may directly start lifting prices or adopt other operations, and the timing for testing the market can be flexible and carried out at any time throughout the whole market-making process.
4️⃣ Consolidation phase
Consolidation is aimed at optimizing the chip structure and accumulating upward energy. Based on the price position, it can be subdivided into low, mid, and high consolidation. Price trends are mostly alternating between rising, falling, and consolidating, with consolidation occupying a significant amount of time. During this phase, price fluctuations are mild and direction is unclear, testing investors' patience.
5️⃣ Initial rising phase
After completing the previous groundwork, market makers initiate the initial rising market, moderately raising the coin price, attracting market attention, stimulating enthusiasm for outside capital, and reducing subsequent lifting resistance.
6️⃣ Washing phase
After accumulating a certain number of chips, market makers will adopt strategies to suppress the coin price to drive out follow-up traders and force early holders to sell.
7️⃣ Lifting phase
After going through previous accumulation, testing the market, and washing out positions, both bulls and bears have formed a high degree of consensus to a certain extent. Once the market makers control a large number of chips and stabilize the market situation, the price of the coin will naturally rise.
8️⃣ Selling phase
As the saying goes, 'To buy is to be a disciple, to sell is to be a master.' Selling is the key objective for the market makers. Successfully distributing chips allows them to convert paper profits into actual gains.
To this end, market makers will use all means necessary, such as creating an illusion of market prosperity, using media to guide sentiment, and employing related accounts for fake trading to create a lively atmosphere, enticing unsuspecting retail investors to take positions, ensuring smooth selling.
9️⃣ Rebound phase
After a decline in coin price, a brief rebound often occurs, which is the rebound phase. When market makers sell, causing the coin price to drop near the profit line, some retail investors, due to the 'bottom-fishing' mentality and their need to offload remaining chips, will slightly lift the coin price, creating a rebound market.
🔟 Sell-off phase
🔶 Passive selling: In the event of sudden negative news, such as major technical vulnerabilities, disputes among project parties, or sudden regulatory changes, panic selling may occur in the market, and market makers may be forced to sell to mitigate losses. This behavior could lead to the market maker abandoning their position or, after a sell-off, finding opportunities to accumulate chips at lower prices again.
The major players have a very frightening brainwashing technique, which is the 'wolf is coming' tactic!
Simply put, it is using funds to create an illusion of 'patterns' in the short term, thereby deceiving retail investors! This technique often occurs during the consolidation washing at the bottom or in the lifting process!
Therefore, when you 'find a so-called short-term pattern', you must be cautious, because what you find, others have also found, and it is likely a trap set by the major players.
Regardless of the type of market maker, it always involves three stages: building positions, lifting prices, and selling off. This is the most basic 'trilogy' of market making.
Always think from the perspective of the major players and understand their trading intentions to follow their steps and benefit together!
During the main lifting process, major players will create multiple pullbacks followed by further large increases, enticing speculative buying on pullbacks. However, once the selling is complete, this pullback will result in a significant drop, rather than a surge, causing you to fall into the inertia of the 'illusion of patterns', 'bottom-fishing', and taking over.
This is why, after the end of a bull market at a high point, there is a pullback, yet everyone still frantically buys. Because everyone has tasted the 'sweetness' before and believes this is also an opportunity.
Therefore, recognize the patterns; because what you can see, others can see too. The 'patterns' that everyone knows often hide the 'conspiracy' of the major players!
The crypto market is always repeating yesterday's story. The sectors being speculated on change, prices change, and the people buying and selling change, but human nature does not change.