Why it’s not a good idea to buy a rapidly growing asset and use highly leveraged debt. And under what conditions do most new users lose money because of Whales
Many cryptocurrency users believe that big investors, known as Whales. They use media hype and technical manipulation of cryptocurrency exchanges for their own profit. It is believed that the income received from such actions, Whales receive at the expense of losses of many smaller investors.
Crypto-Upvotes experts told us what schemes Whales use to manage prices in crypto markets. And how not to fall into a trap prepared by them.
Our experts tell us what manipulation schemes Whales use
Whales use the same schemes to manipulate the price of an asset. As do most famous investment funds or banks on the stock market. In exchange trading and speculation, psychological factors always matter. It is enough to leak FUD about problems of this or that crypto-platform. As their tokens begin to decline in price. Also our Crypto-Upvotes experts give an example of tweets of Elon Musk. After which the value of some “meme” cryptocurrencies quickly rises.
Another popular method of manipulation is through volume sales or purchases of assets. Selling can stimulate a decline in the value of BTC and other coins. Or be a signal that the price will start to fall. A large purchase of an asset by an institutional investor could be the result of insider information. And predict a rapid rise in price of coin.
There are quite a lot of opportunities to manipulate the price. Informedness of exchanges themselves allows Whales to create conditions for short-term price changes. Clients of some exchanges say that after making the first serious profit on margin accounts (futures contracts). They have problems with opening “sell stop” and “buy stop” orders. Which automatically and unnoticeably for trader change to other types of orders. For example when BTC quotes were balancing near $20,000. FTX clients began to complain about the inability to place buy orders below that level. Because their prices “are out of the range calculated by this platform”.
Another way to manipulate without direct sales. Is to create “walls” of buying or selling. By setting high volumes to sell at lower market limits. It forces those who want to sell to lower their prices quickly. After that price falls and the “wall” goes even lower. In fact, Whale is not even directly involved in trades in this scheme. But he provokes other traders to conduct transactions under much worse conditions for themselves.
How not to fall into trap prepared by Whale and not to lose your money
A huge number of bull and bear traps are created specifically to take money from new investors. Therefore, investors without experience are advised to engage in long-term investments.
Therefore, we should not be focused on actions of large investors. You have to follow their actions, but don’t try to repeat all their actions yourself. That way there is less chance that Whales will use you for their own goals. And forcing you to buy or sell something. Make your own decision, not influenced by tweets from Elon Musk.