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Was the last Bitcoin drop due to manipulation?



Some analysts believe that numerous leveraged Bitcoin positions have been liquidated due to price manipulation.


On Saturday, December 4th, 2021, the Bitcoin price fell extremely quickly in a short time. Numerous stop-loss orders were triggered from leveraged positions and numerous positions or traders were liquidated. Analysts assume that whales (market participants with large crypto stocks) were responsible for this and operated so-called “ stop-hunting” . Whales sometimes manipulate the market to drive smaller traders out of the market.


In a leveraged trade, a trader borrows money from the stock exchange. For example, a trader could buy Bitcoin for 50 euros (open a long position) and borrow an additional 450 euros from the exchange. The position size in this case is 10 times as large. If the Bitcoin price then rises by 10%, then the trader does not just make 10%, but 100% (10% * 10). However, if the Bitcoin price falls by more than 10%, then his position is liquidated (-100%) and the trader loses his stake.


What is stop hunting?

According to Binance , market manipulation is activities that manipulate the price of an asset and give the wrong picture of what is happening in the market. Market manipulation can take many forms, from wash trading to stop hunting, whale wall spoofing, and pump and dump schemes. The fact that the cryptocurrency markets are largely unregulated makes them vulnerable to manipulation by a few poor market participants.


The Whales can execute a variety of sell orders to depress the price of a coin and trigger the stop-loss positions set up by investors (orders to buy or sell a stock when it reaches a certain price, which are placed with a broker), resulting in an automatic sell-off that allows the whales to buy the asset again, but this time at a significantly cheaper rate, and then the market rebounds. This phenomenon is known as stop hunting. Traders typically use technical analysis to determine the prices of their stop loss positions.


So-called wash trading describes the phenomenon when an exchange buys and sells cryptocurrencies in extremely short periods of time in order to artificially inflate the trading volume on the exchange. As a result, the stock market receives the attention of investors or traders, which then leads to a distorted price formation.


Whales sometimes place large sell orders to get other market participants to sell. Then, when the price of the cryptocurrency (such as Bitcoin recently ) falls due to large sales, the Whales remove their sales orders from the order books and then buy the cryptocurrency at a lower price. This process is known as whale wall spoofing.



In the pump-and-dump process, several people team up to buy small cap altcoins and then sell them at a higher price once the coins get the attention of investors.


How to Avoid Stop Hunting

Indications of possible stop-hunting manipulations can be obtained by examining the order books. However, since order books only provide snapshots, it makes sense to examine other data as well. Compare the data on the assets of an order book with more than one source, such as B. Coingecko or Coinmarketcap . Prefer to make decisions based on historical, long-term trends, rather than short-term price movements.


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All information contained on our website has been researched to the best of our knowledge and belief. The journalistic contributions are for general informational purposes only. Any action that the reader takes based on the information found on our website is entirely at your own risk.

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