March 7, 2021

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How do whales manipulate the price of Bitcoin? It’s quite simple

3 min read
How do whales manipulate the price of Bitcoin? It's quite simple

CryptoSlate.com has published an interesting article describing how bitcoin whales (this is how market participants who own large amounts of BTCs) can manipulate the price of Bitcoin quite easily.

The article refers to the findings of the crypto-influencer Alby Ja, who claims that one of the bitcoin whales has provided this information, subject to anonymity. Quite honestly – we cannot verify whether the interview with the whale happened by chance, but it does not change the fact that the price manipulation procedure is quite simple for whales.

The anonymous whale first pointed out that at the current size of the cryptocurrency market, at least $ 100 million must be owned to handle the price of Bitcoin. These must be divided into several exchanges. The idea is to create the illusion that demand for a given cryptocurrency is rising or falling.

The whale’s strategy is to place large orders on different exchanges without really wanting to realize them. Thanks to its activity, however, other investors will learn about the increased interest in trading the given asset and the increase in the number of orders waiting to be filled. On this basis, they will believe that other market participants will try to buy or sell at a certain price. These investors will therefore place their buying or selling orders in the same price range in which the whale placed them.

As a result, the market is usually shifting in the direction in which large whale orders are placed. At this point, however, the whale will cancel its trading orders (orders), but this does not apply to orders from other investors whose orders will begin to be executed. Insufficient pressure to buy or sell will push the market in the opposite direction, resulting in losses for investors and huge profits for the whale.

An anonymous whale admitted that sometimes it really does make its big orders. When this happens, the market tends to grow or fall significantly. The substantial bull or bearish signal it has triggered tends to trigger the so-called “FOMO” (fear of missed opportunity), when other investors enter the market and fear that they will miss the opportunity to jump into the market and seduce themselves on the wave of success.

This type of business behavior usually pushes the price of cryptocurrency even further in the direction it went. Since most participants have set trading orders to Longy or Shorty (depending on the trend type), the whale earns from pre-set sales orders. Eventually, the market reaches the point of exhaustion which results in retention. This results in large profits for the whale that has already left the market and large losses for investors who have jumped in the FOMO phase.

The Cryptoslate portal notes that, although market manipulation is unethical and illegal, it is common practice, not only in the cryptocurrency market. Retail investors must therefore understand as soon as possible how these whale practices work to protect their capital.

Even with regard to whale manipulation, the best form of investment in Bitcoin is still “HODL” (long-term holding), or regular purchase at the same intervals for the same amount, which averages the purchase price of the BTC. Avoiding short-term deals is also the best strategy to avoid the risk of losing money through whale manipulation.

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