In my previous post, I went over how and why exchanges would create fake volume by using a market manipulation method called wash trading.
If you missed that one, you can find a link to it here.

Today I want to go over how an individual would be able to manipulate the crypto market and why they would want to do so. Whales today in the crypto markets have a couple different options but right now I’ll be speaking about order spoofing.

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To just briefly look back on the first post of this series, an exchange is able to create and fill so many orders on their books because they have the means to do so. By that I mean that the exchange is in possession of a lot of coins and things called trading bots that enable them to create and fill thousands of orders a day.

Today we are adjusting the magnifying glass to inspect individuals who have the ability to do something like this and with that, things get a bit more serious.

After all, individual traders have anonymity on their side and therefore can get away with much worse with slim chances of penalties. The average Joe crypto trader can’t exactly pull off a stunt like this. What the individual needs is a lot of coins to throw around.
Anyone in possession of that amount of crypto is considered a whale. If you’re new to this space, you’re going to be hearing that name thrown around a lot. Whales exist by being early adopters, early miners, selling at the top and buying when others are panic selling. Basically they found success by going against the crowd and taking risks.

Some whales are good, and some are greedy, today we are examining the greedy ones and their tactics for getting more coins.

First, let’s understand what buy and sell walls are.
Let’s say a whale finds himself wanting to buy his coins at a lower price. If the market is not giving him the opportunity to buy at the price he wants and if he has enough coins at his disposal, he could very well make it look like there is suddenly a lot of activity. Activity that is moving in the direction the whale wants.
The thing to remember is that there are other eyes that are watching the order books of that exchange.

The whale could put up what are called buy or sell walls. These are very large orders placed to make it appear there is a strong sentiment either for the price to rise or fall.
If the whale sets a very large and low priced sell wall, let’s say the order is for 500 bitcoin, it forces others who want to sell right away, who are impatient, or who don’t notice the sell wall, to sell at a lower price than that wall. This provides liquidity at lower prices of that sell wall.
At this point, all the whale needs to do is cancel the order and those smaller sell orders will quickly be sold and the price will reflect this downward trend.
A large and low priced sell wall can mean that a whale wants to drive the price down so they would be able to accumulate more at a lower price. Or it could mean that the whale is holding a short position for that coin and a falling price means more profit for him on the other side.

The same could be done in reverse if the whale wanted to sell their coins at a higher price. They would place huge buy orders to drive the price up, remove that wall and then take advantage of a higher price to see a bigger profit.

HOW TO SPOT A SELL/BUY WALL: A whale doing something like this on purpose is easy to spot when you see a large buy or sell order of the same amount, like in the previous example, say 500 bitcoin but is removed and then set at different prices moving downward for sell orders and upward for buy orders.

Before you start thinking that all is lost, keep in mind that one whale putting up sell walls on one exchange, does not mean the same story on other exchanges.
If you are a trader, perhaps patience will prove beneficial along with the reminder that sell walls can disappear.

This my friends is the introduction to one hell of a rabbit hole.

Don’t miss out on the next posts in this series, there is a lot more to come.

Additional Reading/Links:

Sell wall explained
More on Sell Walls
Order Spoofing and Stop Loss Hunting
Whales manipulation