The latest crash in BTCUSD brings to light the influence of the market manipulators. A tiny push from the whales and the FOMO effect takes over.
Greed and herd-mentality complete the loop. Investors jump into the fake bull trap and end up losing a lot of money. Whales make money even if the market crashes.
Delving deeper into the BTCUSD crash
The crash that happened yesterday was a two-pronged approach. It began a day earlier when BTC rose abruptly.
- The first stage of the crash began when the traded volume spiked on June 1. In an illiquid market, it doesn’t take a lot of buying to manipulate prices. Once people thought BTCUSD would go up, they started buying. It was the FOMO phase. That is all the whales had to do!
- Now, as the price went higher, the whales could sell and gain from the spread. The fact that in six minutes, BTCUSD crashed, proves a very few participants did the massive dumping. The crash took just about six minutes!
Here is the BTCUSD daily chart.
How does a BTC crash benefit the whales?
A crash could benefit participants who hold shot position. Shorting BTC means they are betting for a decline. And when BTC declines, they benefit from their shorts.
BTC whales and BTC exchanges need not necessarily be different entities. Exchanges encourage traders to opt for leveraged positions. And when something totally unexpected happens, the trader with the leveraged trade loses the most. It occurs if the trader took the view that was opposite to the direction of the crash.
How to be safe from such crashes?
Exchanges know the sentiment of the market, as they are aware of the trades taking place. And therefore, it is not a big deal for them to manipulate the market.
The best way is to stop taking directional bets in BTCUSD. Hedging, if possible, should be adopted. Long term investing in an appreciating asset is always a better decision than day trading.