Manipulation of the price of Bitcoin and digital currencies by whales is the bane of traders who buy and sell online in virtual currency exchanges.

Unlike traditional markets, a large part of the digital currency market and its exchanges are unregulated, and almost all Bitcoin traders have experienced strange fluctuations and price manipulation. Despite the prevailing conditions, many traders feel that there are few things they can do to be resistant to whaling and digital currency price manipulation and to make a profit.

Movement of whales and digital currency price manipulation

Spotting whale moves is like a game of cat and mouse, but there are tactics small traders can use to get around these moves. In the following, 3 methods are introduced to understand the movements of whales to manipulate the price in the digital currency market.

Hidden orders

Strategies such as hidden orders are one of the tools that whales use during their big purchases and sales. In such orders, each large order is divided into several small orders and they are prepared for registration in the order book - OrderBook. After each small order is placed, the next order is immediately placed on the order book. This tactic is also called Iceberg.

This strategy is exactly the opposite of the Buy/Sell Wall strategy. In a buy/sell wall strategy, a cryptocurrency whale places a very large order near the market price, but is careful not to fill the order. Using this tactic, retail traders are fooled into thinking that large order means real supply or demand. The whale also uses the feelings of small traders and buys or sells in the opposite direction of that large order.

To deal with digital currency price manipulation through the wall strategy or hidden order, it is better for traders to pay as little attention as possible to the depth part of the market.

Some traders consider market depth as an essential part of their trading routine and even use sophisticated programs to track inflows and outflows to the order book. It is worth noting that market makers and whales know how to trick such people with more manipulation.

Wash trade or washing business

Sometimes whales manipulate the price in the digital currency market by using the wash trade technique through several exchanges. A wash trade is a transaction in which a person buys and sells an asset at the same time. In other words, suppose a whale enters a buy order in the order book and then executes a sell order at the same price. In this case, this person made the deal with himself and nothing special happened.

Some whales use the wash trade technique simultaneously in several exchanges. In this case, whales try to manipulate the price and deceive traders in the same exchange or other exchanges by doing wash trades in one exchange. In this case, the volume of transactions is unrealistic, and some traders, imagining the high volume of transactions, are deceived by whales and enter the trade.

In some cases, the financiers of small projects pay money to the market makers and ask them to promote the digital currency market of their project using Wash Trade. Usually, in this method, we see short-term price growth, but most likely, the price will be dumped immediately and the capital of many small traders will be wasted.

To avoid being fooled by this tactic, it is better for traders not to pay attention to the high volume of some transactions, which is very different from the average daily volume of a currency.

Liquidating orders to manipulate the price of digital currencies

It may seem crazy, but sometimes whales try to activate the loss limit or the liquidation limit of the orders of small traders of the digital currency market by manipulating the price. This happens especially when the whales are aware of the market conditions and know at what price a large part of the orders will be liquidated. One of the tools used by whales to detect market conditions is the Funding Rate index of each exchange. Sometimes this action on the part of the whales leads to a cascading liquidation of orders and a sharp drop or rise in price.

Whales take advantage of the conditions created by the liquidation of orders and open sell or buy orders when the price rises or falls sharply.

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