2019-12-07 2018-02-27 Whales’ Games or Manipulation in Cryptocurrency Market (part 2) Mikhail Hypov 2019-12-072018-02-27

We continue studying the dark side of the cryptocurrency market

In this post I continue the top of manipulation techniques in the cryptocurrency market.

Dear friends,

I continue my educational section and the series of articles about manipulators and how they act in the cryptocurrency market. In the last post we studied the following types of manipulation:

1) Holding up the level

2) Trading blotter topple

3) Block

4) Draining

In this post I will continue my Top of Manipulations, enriching it with the most common types of manipulation.

5) Puncture . Its name suggests the manipulation principle.

It is about a huge, one-time order at the price, lower than the market.

As a result, this huge capital fulfills all small orders in the needed side and triggers all the stop-losses of poor traders.

A vivid example of such manipulation was not long ago, 24.03. Bitcoin price dropped down by more than 750 USD just in a minute and then recovered rapidly.

This behavior is obviously unnatural. No trader in the sane mind will put an order to sell Bitcoin in at the price, 700 USD lower than the market one, selling it at a loss.

However, it is one of the favourite whales’ techniques to dump on the market.

First, it benefits the exchange, which charges margin call to the unlucky traders, using the financial leverage, and completely deprives them of their deposits.

Second, it is convenient for large investors, who are interested in the coin crash, as similar punctures suggest all the cryptotraders that the market is weak and the mood of “large and strong guys” is bearish.

Third, it breaks down the support levels, according to technical analysis.

The level of 9.900USD was quite strong and was a real threat to bears, as, having consolidated at this level, the ticker could easily pass through the psychologically important level of 10.000USD and continue storming the new highs.

However, we see in 15-minute chart above, after the strong puncture, the market was no longer supported and, during the next six hours, quite rapidly dropped down to the lows, marked by the puncture borders.

6) Artificial inflating the volume. It is another, quite popular, way to manipulate the market.

Many of you are likely to have come across the situation, when a large buy or sell order is placed, being constantly bought out or sold off. The aim of these actions is difficult to understand at first.

If you have a look at the calculation formulas of popular indicators, you will get the answer.

The catch is, despite all the variety of indicators in technical analysis, all of them take into account some or all of five variable, such as:

- open price of the period,

- close price of the period,

- the highest price of the period,

- the lowest price of the period,

- trading volume for the period.

Putting orders and buying them from themselves, the manipulators influence all the five parameters:

- they dramatically increase the trading volume,

- they don’t let the price move, forming the open price and the close one in the narrow range for the plan period.

As a result of this manipulation, as a rule, there are doji, evening (shooting) stars and hammers (from classical Japanese candlestick patterns), or pin bars and gravestone doji (from price action patterns) in the charts.

Anyway, no matter how you call it, the catch is that in the chart, there is a certain point formed, which is the point of the local trend reversal.

A huge volume will certainly indicate the market’s high interest in this level and paint divergence in oscillators, considering the trading volumes and volatility, so, a reversal signal will be indicated.



In the chart above, there is an example. May be, it is not a perfect one, but still, one can notice here that, despite the small size of the candlestick in the red corner, it shows rather large volumes. That have immediately influenced the indicator, causing it to show a clear divergence.

7) “Shutoff. It is a quite simple but highly efficient tactic, used by whales to stop the market or reverse it.

For example, imagine that you need to limit Bitcoin growth by the level of 10.000 USD.

In the first stage, while the market is rising, we buy out all the small orders below this level. That causes the market to grow too fast and get overheated.

As the second step, when the price is moving closer to the desired level, we put all the added orders together with our funds and stack up a single wall. Overheated and exhausted market crashes against the wall. Unable to break it through, the market has to reverse and continue the correction.

This tactic is far more efficient and cheaper than, for example, holding up the levels. On the one hand, it allows bulls to let out the steam, on the other hand, it doesn’t require large resources. Moreover, it brings the whales profits during the manipulation process itself, for they manage to buy cheap and sell at higher prices already during the “show” itself..

8) Dumping out. Dumping out. It is another common practice to get rid of unwanted players, before the market starts moving in the needed direction.





This situation is well displayed in the chart above. We see the market moving in a rather narrow corridor.

According to the basics of technical analysis, we are waiting for the breakout to identify the direction and enter the market during the rollback.

At first, we see, there is the breakout from below and, having waited until there was the rollback to the upper channel border, enter a long trade. However, the market, instead of continuing its rise, drops down and triggers our stop-losses to close the positions.

Then, we again wait until the channel is broken out, it is broken out, already from above.

So, we reverse and, when the price is touching the channel border, open short positions. But the market again moves against us, closing our trades with stop-loss.

In this situation, any sane trader will be confused and will no longer try to enter the market until the market trend is identified exactly.

As you understand, starting from this moment, the fish has taken the bait, and whales only need to wait for the right time and catch it.

Traders are waiting patiently, until the market trend is determined.

They see (in the chart above) the market moving up again. But they don’t rush to buy during the rollback and wait until the ticker breaks through the last local high.

The market breaks it out as well. And so, traders, sure that the price will certainly grow, are joyfully buying at the rollback down to the nearest support level (marked with the red star).

These traders will be followed by the other ones, expecting another surge.

In this stage, the conductors themselves come to the market.

Market makers drain down their stocks at the highest prices in the falling market, hitting the jackpot, triggering all traders’ stop-losses and charging margin-calls.

9) Play on correlation. It is a rather complicated and source-consuming manipulation. Though, it will more than cover all the effort with enormous profits in the end.

The tactic is based on the principle that in the market, there is a strong correlation between most coins and the chief one, Bitcoin.

Manipulators, knowing about this relation, can use the market situation to their advantage.

In the picture above, we see BTCUSD moving in the upper half of the chart (the blue line).

BCHUSD price is moving in the lower part of the chart (the red line)

These two instruments usually move close by each other. However, in the chart above, we see Bitcoin going down and Bitcoin Cash is following its own way up.

That was just one day, enough for BTC to be held up by the manipulators, as already on the 20th, we see traders eagerly giving up falling Bitcoin, which resulted in BTC growth up to incredible highs of 4000 USD.

There, it is the right time to end up. Manipulators, having reached their target, start selling out their BTC at the high, so, crashing the market down.

These are not all the types of the cryptocurrency market manipulation. However, these nine tactics described are the basic ones. To remain untraceable in the market, manipulators often change their tactic, combine and mix the techniques, to make it more difficult to find them out.

However, after you read this article, you have received a chance not to be hooked, and, may be, even to make profits from whales games;)

Be careful! I wish you good luck!

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