Written by Maurice Cardinal *The moment-by-moment trading action of a cryptocurrency, including Bitcoin, can have a huge impact on its price, irrespective of things like positive or negative industry and investment reports, strong or weak fundamentals, and either unproven or impressive technical developments.
As of December 2018, Bitcoin still represents the cornerstone for overall market price movement, which means, when BTC moves up or down it has a corollary effect on prices of other coins. For now, at least, that’s the conundrum of the crypto market and partially why WHALES have such influence. It gets even more pronounced when these big traders form a pod, or pods, whether by serendipitous circumstance, or by design.
A Short Squeeze forces a large number of short sellers to close their position, which historically, usually pushes the price even higher. When traders short a coin, they borrow coins from another account and sell the borrowed coins, agreeing to replace the coin at a later date. The trader collects profit on the difference between the sell and buy-back prices regardless of the direction of the price movement. It’s important to remember that today, falling prices don’t necessarily mean long positions and unrealized losses, and also that buying pressure is nil when shorts are high, especially when at an all-time high, like recently. It sets the market up for a steep price rush followed by a short.
In August of 2018 headlines warned …
… and Several Months Later in December 2018
Some think Bitcoin’s wild ride is a complex game of cat and mouse played by Whales purposefully manipulating the market and making a killing on EACH short cycle – kind of like a real Killer Whale/ORCA playing with a seal before it moves in to execute the trade and gorge on profit in a series of measured gulps. In other words, you don’t eat the profit in only one mouthful, you milk it to make it last.
This trading mentality indicates that the market is settling down to the point where experienced traders can see patterns. They feel confident enough to play games and to not grab wildly anymore. When an inexperienced trader is hungry or unsure, they lunge at anything that comes along, but when a trader knows something better could be waiting around the corner as well as long term over the horizon, it’s beneficial to diversify your strategy and manage the space so you know exactly when to buy back to leverage profitability.
Unfortunately, it’s not as if we can look back at history to see what occurred the last time the crypto market moved like this, because there was no last time. This is it. It’s still all new for everyone from moment to moment. The best we can do is draw comparisons with traditional stock markets, but unfortunately there aren’t yet enough similarities to make accurate predictions. Thankfully, Artificial Intelligence coupled with Machine Learning is aggressively improving our understanding, operations, and the quality of executions.
Consequently, when we think we have a cryptocurrency trading pattern mapped and collated into some form of predictive order, in a microsecond new data layers of knowledge and technology are added to the equation. Yesterdays’ algorithms, which are edited and rewritten more and more by AI and Machine Learning processes, evolve autonomously and substantially more rapidly than in even the recent past. Growth in some areas is exponential, especially in high-end crypto trading bots developed by top traders and guarded zealously. High-end BOT software is for sale or lease, but at prices higher then the GDPs of small countries. Knowledge is still power, but today it’s leveraged with highly sophisticated technology that lets us trade securely at lightening speed and with enormous volume.
Some people believe Bitcoin’s volatility is caused by more than just Whales. They claim exchanges are purposely, and illegally manipulating prices, which technically could happen, but it would be sporadic and not have much overall impact.
A more believable theory is herd mentality, which is probably having the biggest impact on Bitcoin.
If sheeple didn’t react so emotionally, and instead based their trading decisions on intellectual and mathematical reasoning, Whales wouldn’t be able to influence the market the way they do. Collectively, without doubt, selling and shorting by an irrational herd has considerable impact on prices.
Theoretically, shorting adds downward pressure while a long position pushes up. Most people trade on leverage, which means that an emotional herd is shorting the market, and a Whale, or a number of them working together as a pod, opens a long position on leverage. They buy BTC at high volume which artificially forces the price up, consequently triggering short sell orders and wiping out anyone who is over leveraged. The market can peak rapidly when you remove downward pressure.
The same can happen whether it is a Whale buying a large volume or if it’s a large group of emotional traders buying collectively. The irony is that Whales know how to trigger herd mentality, which gives them even more advantage.
Some people think a Bitcoin BUBBLE is about to POP! Maybe. Who knows?
Pick a bubble, any bubble, and then watch how quickly dozens more slip in to take its place.
The moral of this story;
Trade mostly with your head, not your heart because as you can see,
there is always another bubble being short squeezed and ready to POP!
Author Maurice Cardinal is a Blockchain Development Advisor and a Crypto Content Specialist at CoinSeason Capital Inc. Maurice has helped develop successful blockchain strategies and ICO campaigns for the news, gaming, healthcare, and cloud computing industries, and has researched, written, and advised about blockchain and cryptocurrency strategies for several years. Maurice is also the author of Leverage Olympic Momentum an early adopter business bible about disruptive marketing and growth hacking. He is also the Editor of CryptoFiatBlog.com