How whales manipulate bitcoin pricing.


Introduction

This drop in bitcoin price despite scaring a lot of people was rather expected for a number of reasons, among them is the manipulation by whales that is the focus of this article,
In my publication Detailed Bitcoin Price Analysis - Different Views of the Current Market Situation I brought that the first wave of bitcoin appreciation always tends to kick back to the top 0.5 fibonacci (which hits about $ 8,500)

 

Analysis 

daily chart

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Here we have on the daily chart the fibonacci time tool giving us a pivot for the price action moment, this shows us possible points where the chart will react positively, it can be observed that points 2 and 3 followed this pattern (in the 3 there is a slight drop before the price rise). This white line marking September 19 would be the trend-based time stamp (I have not left the tool on the chart as it would be difficult to see clearly) marking point 4.236 giving us a decisive confluence. the previously established pattern has been broken resulting in the fall we are seeing, this could mean that there has been a reversal in the time pivots and the top-top pivot would show us an upward reversal (this marks October 25th) or so This is a trap for sellers.

Future Contracts

For this part of the analysis you need to understand what futures contracts are and how they work, and then understand how this may have influenced the recent price drop. Here is a brief summary, if you do not know I recommend researching further.

A futures contract is a commitment between two parties, a commitment to buy or sell a particular asset at a specified date at a certain price. Futures contracts are an important financial instrument as they allow futures to be traded today under conditions of uncertainty. To guard against price fluctuations over time and to make a profit, the dealer contracts with a buyer for a price agreed today.

Let's make a hypothesis to make it easier to understand: Let's say I'm a company that exports a product, on the international market that product will be traded in dollars and my local currency is subject to price fluctuations in relation to the dollar if I export a product for $ 1,000 while my exchange rate is 4, when converting I expect to receive 4,000 local currencies, but if, say I need 6 months to produce that and my exchange now is worth 3,8 then I would have when receiving 3,800 local currencies. But if I have a futures contract I am protected from the price fluctuation that occurred in these 6 months.

In theory, this works very well in markets like the New York Stock Exchange where there is a high volume of trading and it is very difficult for a group to manipulate this market. The point is: the cryptocurrency market is still very small and easily manipulated.

How do futures contracts work on bitcoin?

Let's say the bitcoin is worth 10,000 and you think the price will fall, from that you make a futures contract stating that the benchmark for that contract will be tomorrow at a certain time and it will expire in two months. If the value in two months is 9,000 you get this difference in bitcoins, if the price is 11,000 you lose this difference because you will automatically buy at this value.

Now, let's say you are a billionaire who entered the market when bitcoin was worth $ 0.1 by buying an exorbitant amount of bitcoins (say 500,000) and want to increase your earnings from this contract now made. You, being a billionaire, can simply buy a huge amount of bitcoin the day the contract was made, thus raising your price the next day to 10,500 and your contract starts to be worth that price, so anything below that value already guarantees you a profit. . During the two months that your contract was immobile you let the market follow its flow normally, so, shortly before expiring your contract, for a much higher profit you can throw 10% of your capital into bitcoins in the market causing a dump. huge sinking price, causing a herd effect and guaranteeing you absurd profits beyond the possibility of repurchasing bitcoins at a much lower price.

 

  • BAKKT is a company that negotiates bitcoin futures contracts.
  • CME has futures contract to expire on 9/27/2019

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Conclusion

The cryptocurrency market is still very small and recent, making it easily manageable, although its revolutionary technology is still hostage to events like the above or the 51% attack (which can still be accomplished through mining pools). ). What remains for us as traders or holders is to follow the flow of whales, identifying events like this and preventing us. I strongly recommend that you keep an eye on the expiration dates of future contracts and watch out for them to avoid losing money.

The futures market has been around for a long time in other spheres such as gold trading, I am in the process of analyzing whether this process took place there as it does here and whether this process came to an end with increased trading, but this may stick to another article (if you wish).

The future of bitcoin pricing is still undefined, currently priced at $ 8,000 and signals point in all directions. I'm waiting for the weekly candle to close to write an article about the most viable possibilities.

 

Thank you for reading, I recommend reading the article I used to support this post :D

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zulonga
zulonga

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cryptocurrencies, introduction and analysis
cryptocurrencies, introduction and analysis

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