In scenarios like the ones we’re currently experiencing — where many cryptocurrencies are experiencing sharp declines — these scenarios could be related to market manipulation by large players, known as “whales.” These manipulations can occur in combination with futures trading, allowing these whales to profit in both bull and bear markets.
How manipulation can occur:
1. Short Selling:
Whales can open short positions in futures, betting that the price of a cryptocurrency will fall.
2. Mass selling on Spot:
To trigger a price drop, these whales can sell large volumes of the currency on the Spot market, creating panic or inducing other traders to sell as well.
This creates a cascade of sell orders, intensifying the decline.
3. Profit in the Futures Market:
As the price plummets, the whale short bet starts to gain value, resulting in huge profits.
4. Strategic buyback:
After the price hits extremely low values, these whales can buy back the assets at reduced prices to close their short positions and/or accumulate more cryptocurrencies.
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Signs of market manipulation:
Sudden movements: Prices fall or rise very quickly, without clear economic reasons or significant events to justify them.
Abnormal volume: A much higher volume of trades compared to the daily average may indicate whale movement.
Lack of fundamentals: Broad and synchronized declines in several cryptos, without negative news or global events.
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How traders can protect themselves:
1. Avoid high leverage: Manipulated markets are very volatile and can lead to rapid liquidations.
2. Use stop-loss orders: Automatically limit your losses.
3. Diversify investments: Avoid concentrating too much capital in a single asset or market (don't put all your eggs in one basket).
4. Monitor whale volume and behavior: There are tools like Whale Alert and others that track large asset movements.
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While there is no way to prove manipulation without detailed investigations, large synchronized drops can indeed be a sign of strategic whale movements. The cryptocurrency market, due to its relatively low liquidity compared to traditional markets, is particularly susceptible to such practices.
These moments can be an opportunity to acquire more cryptos at a liquidation price and decrease the average value, aiming for profits later on, especially in the long term.
I would recommend more consolidated currencies, such as $BTC , $SOL
Another case would be to bet on $XRP .
