Whales Harvest Small Fish On Coinbase

At times of low liquidity, it becomes easier for large traders to move the market in their favor.

Whales Harvest Small Fish On Coinbase
What are these big accounts' tactics?

Retail traders are almost always at a disadvantage to "Big Money" in the markets. These large accounts have the cash, and often the training and information, to be able to push the market around to their own benefit, at the expense of smaller fish swimming in the same waters.

This has always been the case, and particularly so in the crypto markets. Unregulated exchanges and thin order books mean that well-resourced traders who know what they're doing can systematically extract value from smaller traders. Even now, when crypto has finally come to mainstream attention and exchanges are looking to maintain compliance, the same is true. Over the long Easter weekend, when trading volumes are lower, liquidity thinner, and volatility typically higher, one analyst noted a particular phenomenon on Coinbase.

Whale Games

The market-watcher saw evidence of manipulation on Coinbase's order books. In short, the strategy entails placing large but fake bids at a key price level. This fools smaller traders into thinking bitcoin's price won't drop below this point and is reversing, so they remove their bids.

The whale also pulls their large order, and the price drops rapidly because there are now so few bids—at which point, the whale puts their bid back at a lower point, buys a large amount of cut-price coins, and enjoys the true reversal.

Here's what I've observed in the Coinbase order books recently. Once we reach a local low ($69k today), a strong 40-50 BTC bid shows up just below that level. This tricks traders and algos into thinking we've reached support and an order book imbalance has now presented itself on the bid side.

However, that bid is fake. It is used to get traders to pull their lower bids and start to lever up at support levels for a swing. As soon as price drifts into this "support" level that bid is pulled, but now the bid below has already emptied out.

They sweep the liquidity for the next $500-$1,000 price range very quickly because all those bids were moved up to the fake "support" level and then once the sweep is complete they put the bid back on (real this time) and price gets a quick reversal.

On weak days like today, they can rinse and repeat this playbook several times and don't need big swings up to capitalize. They can repeat this over and over using the same capital with the simple goal of accumulating more bitcoin in small increments on each sweep and pump.

A fascinating game to observe.

If you have $2-3 million to play with, it's more than enough on low-liquidity days to trick small retail traders and algo bots into moving their bids and systematically harvesting cash from them.

Of course, even mid-sized whales have to be careful when there are leviathons swimming in their seas. This is why public holidays often see increased volatility. When liquidity returns, it becomes harder to manipulate the market.

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