2019-12-07 2018-02-19 Whales’ Games or Manipulation in Cryptocurrency Market Mikhail Hypov 2019-12-072018-02-19

There have been manipulations and unnatural moves in the cryptocurrency market too often lately. What do you know about this?

I suggest you study the topic more thoroughly and learn about the dark side of the cryptocurrency market.

Dear friends,

I continue my educational posts, and this time I would like to speak about the manipulations in the cryptocurrency market.

The cryptocurrency market is in no way regulated and there are simply no supervisory authorities. So, there are more often the signs of market manipulation.

That is why, it is very important for the beginners to distinguish the natural market moves from the direct interventions, not to be on the hook with the market manipulators.

In this post, I would like to focus on the direct intervention in trading and the influence on technical analysis.

Perhaps, not everybody has thought about this, but the manipulators’ community is not homogeneous, each group with their own objectives:

1.Large HODLers.

This kind of participants is the least dangerous among whales.

As a rule, these are cryptocurrency fans, strongly confident that cryptocurrency will grow eternally.

They managed to stock up at cheap prices at the very beginning of the cryptocurrency market. For now, HODLers will hold cryptocurrency to the last breath. But even they can start panicking, and if any of such players starts selling off, the market can be seriously affected.

2. Miners, mining pools and even pool syndicates

These guys have built whole empires on cryptocurrency, real factories producing crypto coins.

They are reluctant to speculate; as a rule, they are interested in the continuing growth of cryptocurrency price. So, at the first drawdown, they would be the first to buy out to support cryptocurrency rate. This kind of whales is often combined with the first one.

3. Large traders. All cryptocurrency market participants, whether they want it or not, have to participate in exchange trading. Most people are not experts in all the peculiarities of exchange trading and trust their money to more experienced and successful traders in the cryptocurrency market.

As a result, large active players with large funds appear in the market, which are able to move it in the momentum.

A large trader has the same objective as smaller ones, to make profits on the exchange by means of speculation.

However, the problem of these traders is that they can’t trade in the trend due to huge deposit amounts, so, they have to buy during the price fall and sell, when the price is rising. That often confuses “small” players and influences, in its way, the trading instrument ticker moving.

4. Cryptocurrency exchanges. As the cryptocurrency market is, in fact, unregulated, cryptocurrency exchanges are free to do anything.

Cryptocurrency exchanges have a vast database, they know all the orders, all stop-losses and take-profits.

Naturally, they are tempted to work a little to their advantage and push the market a couple of points higher, to pick up all the traders’ stop-losses, or, on the contrary, to slow the market down when the price is so close to the take-profit level.

All the market participants should understand, it is the cryptocurrency exchange itself that is the main market maker. If an ordinary trader wins, the exchange loses, that can’t be allowed.

Among all market participants, this kind of whales is one of the most dangerous, as it is hardly possible to discover such manipulations and catch the cheater red-handed.

Of course, all the above is not true for all cryptocurrency exchanges. However, in this respect, it should be understood, large platforms with many years’ experience in working are more credible.

5. Large investors. This kind of whales is really large players, such as international corporations or countries.

These participants have almost unlimited financial and executive resources.

Only imagine that a large investment fund, such as Goldman Sachs or Morgan Stanley would like to enter the cryptocurrency market. They can well order an article in the most reliable paper in the world about cryptocurrency economy’s crash, or even try to lobby for a law, which can tighten the rules for smaller market participants.

I think this kind of players to be one of the most dangerous, as it is able to radically affect all the market participants, including the previously described four types.

Now, having learned about the kinds of whales, let’s try to find out the ways they work:

1. Holding up the level

It is likely to be the most common tactics of whales.

The principle of this manipulation is quite simple. In the chart above, there is a good example of how the whales are fighting for the level of BTCUSD – 10 800.

In the beginning, we see large purchases on the highs, to suppress the bears’ attempts for correction. Then, having waited for a while, they make some investments, completing Flag pattern and suggesting further rise.

With the breakout, the beginners see the pattern starting to work out and support the rising. At this very moment, the whales start to close long positions and move against the mass, receiving an opportunity to fix at highs and bank the profit.

These tactics are also applied to paint the patterns/accumulate the “mass”/create the support and resistance levels.

2.Trading blotter topple.

Another common tactics. Many are likely to have seen the situation, when there are a lot of buy orders in the blotter, and few of sell ones, but the market isn’t moving in any direction, or even is starting to fall.

The matter is, if one uses the “Market Execution” to open a position, the orders won’t be displayed in the blotter. That makes traders believe that the market will surge soon, so they get into a trap, feeding their orders to fat whales.

3. Block.

Another manipulation with trading blotter. A very large order is put, in the way it is seen by those, who are “at the front”, but, at the same time, it should be distant enough.

This order will highly increase bids volume, which will influence the whole market, indicating bullish trend.

If the desired result is achieved, the block is moving up, following the price growth until there is the time to sell off at the price, the manipulators have determined in advance.

In case, when the market moves in the opposite direction, the manipulators can remove the order with a click of a button, thus letting the market in free fall. At this moment, especially insidious whales make a 180-degree turn and put an equal block, but made of sell orders, thus pushing the market to the bottom, where they will buy out the market at extremely low prices.

4. Draining

There are three kinds of draining:

1) Test of character. As a rule, such draining occurs after a series of pumps in the strongly heated market.

First, it allows whales to restore the resources for a new pump and fix the profits partially.

Second, it is a test of an artificially created trend’s strength. If the market compensated the draining, one can relax for a while, letting the new trend move in the needed direction by itself.

2) Trend reversal. – This kind of draining is far less often. It is used to reverse the market at a necessary point.

As a rule, it is used to create a resistance point at a needed level, or to form a necessary pattern

In my recent forecast for Bitcoin, I have told about this case. The manipulators were reluctant to lose an opportunity, so they made a “buyout”, a manipulation, made in the direction, opposite of draining, but with a similar objective.

As a result, the level was broken out, and it was suggested that Head and Shoulders pattern would start working out.

3) Trend “boosting”

This kind of manipulation is the opposite of the previous kind and aims at putting an additional pressure on the market during the correction, suppressing all the attempts for a rollback.

This kind is insidious in the way that the manipulators can provide bears with small volumes throughout the whole trend, without giving themselves away.

We see a good example of trend boosting in EOSBTC.

Although, EOS has drawn down rather deeply over the day, and the market requires for a price rebound, the manipulators suppress all bulls’ attacks, pouring large volumes of short positions, thus leaving bulls no chances to reverse the trend

As I have already said, there is the “buyout” manipulation, opposite of “draining” in its direction. It occurs to pump the market and applies the same tactics.

Unfortunately, there are more types of manipulation, used by large players, than I managed to describe in this post. So, if you are interested in the topic, I will continue it in my next educational posts.

I wish you good luck and good profits!

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