Nick Chong · 1 week ago · 2 min read · Insights via Grayscale Investments
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Alby Ja, a cryptocurrency enthusiast, said to have spoken with a Bitcoin whale who explained how simple it is to manipulate the market with “no less than $100 million.” Here are his insights on how to trade like a crypto whale.
Influencing the market behavior
According to Alby Ja, inflating or deflating the price of a cryptocurrency in order to influence the market behavior for personal gain is very easy. The only thing that anyone who wants to venture into such practices would need is patience and a big sum of cash.
Speaking with a crypto whale, Ja was able to learn about the ins and outs of artificially disrupting the free and fair movement of the market. The anonymous whale affirmed that “no less than $100 million” are needed. But, these funds must be distributed throughout different exchanges. The idea behind it is to create the illusion that demand for a given cryptocurrency is increasing or decreasing.
A sophisticated whale would place large orders across multiple exchanges with no intention of having them filled. Investors become aware of the increasing amount of orders waiting to get filled. Therefore, they will be encouraged to believe that other market participants are trying to buy or sell at a certain price. These investors will then place their buy or sell orders around the same price range where the whale placed his.
The market will eventually move in the direction where the big orders are placed in order to fill them. At this time, the crypto whale will cancel his orders. Meanwhile, the buy or sell orders from unaware investors will be triggered. The lack of buying or selling pressure will push the market in the opposite direction resulting in losses for investors and massive gains for the whale.
Ja pointed out that sometimes a crypto whale will actually let his large orders get filled. When this happens, the market tends to surge or plunge significantly. A substantial bullish or bearish impulse in the crypto market tends to trigger “FOMO” (fear of missing out) among investors who even enter a trade at market price.
This type of trading behavior usually pushes the price of a crypto even further. As the majority of participants are either long or short, the whale’s take profit orders are getting filled. The market eventually reaches an exhaustion point triggering a retrace that results in profits for the whale who already exited the market and losses for those investors who “FOMOed” in.
Even though market manipulation is unethical and illegal, it is a common practice in any market structure. Therefore, retail investors must understand how these obscure practices work in order to protect their capital. In a blog post, Nasdaq suggests that avoiding short-term trading is one of the best ways to hedge from market manipulation.