Crypto Market Manipulation – The Way It Works

Table of Contents

Disclaimer: Crypto is a fast-paced economy and things change quickly. Information on this post might be outdated even if written today. Do your own due diligence and stay safe. I might get affiliate commissions for purchases made through links in this post. Read the disclosure.

Alpha Gained:

News

Walmart and LTC

One of the biggest market manipulators is news. Constantly billions of people around the world are connected to the news in many different forms. News breaks out in social media channels and on a multitude of websites. A piece of simple news like Walmart accepting LTC as a payment method. The news broke out 13th of September and the reason why it got so much wind, was because the news was published by a respected news site.

And when the news came from a respected source, other news sites picked it up without checking whether it was facts that were published or fake news (as it turned out). This only shows how easily the news can manipulate the market and how easily people trust what they read, without checking if the news has any facts and truth behind it.

This “small” hiccup made the LTC price jump roughly 35% in a matter of minutes. When the news was confirmed by Walmart to be fake, the price returned to the normal structure instantly, making people lose a lot of money.

litecoin_price_manipulation_example
Litecoin’s (LTC) price jumped after Walmart news hit the headlines and was on people’s radar.

COVID-19

COVID-19 event sent the stock market to a downward spin and “everyone” thought the world was going to stop from spinning, and in a sense, it did just that. It’s interesting to see that in a sense the stock market tells you the overall feeling of people all around the world. When the stock market falls, people are afraid and start to sell. The main driver here is fear of losing a life (basically).

COVID-19 didn’t just break the stock market, it also broke the crypto market and so events and how they are publicized online, all affect the way we make decisions in our lives. Bad news makes us do things to protect ourselves and good news gives us the bravery to go out for an adventure.

bitcoin_price_drop_covid_effect
Bitcoins’ price dropped roughly 47% in the span of 5 days after COVID hit the market globally

Stock Market

The biggest stock market exchanges:

  • NYSE
  • TSE
  • NASDAQ
  • SSE
  • EURONEXT
  • HKSE
When the stock market falls, Bitcoin more than usually follows and the rest of the altcoin market as Bitcoin falls.

The stock market shows the emotions of people. When people buy and the trend is going up, people have confidence in the market. When the market goes down people have lost faith in the market and sell their positions, either to take profit or cut losses. More than usually Bitcoin has its own life, but when the NYSE stock market dumps significantly (in the stock market frame), Bitcoin will react to it and starts to go down as well. 

When the stock market pumps significantly so does Bitcoin. Everything in between is either dictated by the news, Twitter, whales, and the rest of the crypto people. The stock market has been going up and to the right for a long time and you can only wonder why such a thing is happening? And an even better question is, how long can that model hold.

There are plenty of times when stock market analysts have said that the market needs a correction. A healthy correction is something that will make the stock market stabilize a bit. When a correction happens in the stock market it’s only a showcase of how people see the world and how they react to different news, especially on financial news.

The stock market is about human emotions, nothing else. All the green and red bars, price action, and trendlines are all human emotions. People either feel safe in the market or they feel unsafe and that all show up in the price action. And the thing that affects human emotions is the personal life one has and the outside world. The outside world consists of news and happenings.

Twitter

Elon Musks’ tweet assumedly caused the price of Bitcoin to drop. Speculation or a fact?

Twitter is a social media channel like Facebook and is very much used by media outlets, news sites, but also by influencers. Influencers like Elon Musk, Donald Trump, Snoop Dogg, and the likes. Twitter enables fast information exchanges, but also fast misguidance.

Twitter is easy to consume and the problem lies in how people consume the information that is fed to them. Twitter feed pushes constant news, tweets, and “data” in front of you and if you don’t question what is said on Twitter you easily become influenced by the words of others.

For example, Elon Musk tweeting about Bitcoin (6.4.2021 05:00 AM), was said to cause Bitcoins crash, while in fact, the crash happened before the tweet and Elon’s tweet was only to state that it was sad that Bitcoin crashed. These little details and nuances are very hard to detect when everyone is assuming that an influencer caused Bitcoin to crash, before even doing fact-checking.

Influencers tend to influence people because people see influencers as smarter than they themselves are. When that is far from the truth. By seeing someone smarter and more powerful than you in social media, you become influenced by that person and can be misled into doing bad decisions in life.

The same goes in the crypto market when a hugely followed person says a thing or two about Bitcoin or some other coin. That person can influence the price of a given coin to go one way or another.

The B Word Interview Event – July 21, 2021 – 11 am PDT

The effect the B-Word event had on Bitcoins’ price

Featured speakers include:

  • Cathie Wood
  • Jack Dorsey
  • Elon Musk
  • Steve Lee (Moderator)

This event had a very special effect on Bitcoin’s price after Elon said roughly something like “I might pump a coin, but I don’t dump a coin”. This sparked an upward trend for Bitcoin’s price and the “world” / market was confident in Bitcoin again. The reason why this happened was that someone that is taught to be one of the smartest people on planet earth said a positive thing about Bitcoin, then surely it has to be a good thing. That is an influence in its purest form.

Whales

“Whale” wallets selling Bitcoin in massive amounts, igniting a massive sell-off among retail investors

September 7th in 2021 saw a massive selloff for Bitcoin and this was at the time El Salvador had officially made Bitcoin a legal tender for the country. This sparked an interesting conversation on Twitter and while some said “congratulations El Salvador is now officially bankrupt”, others gave an interesting perspective stating that the dump was only a nice gesture from a whale, so El Salvador can buy more Bitcoin for their country at a lower price.

Whales are considered accounts/people/entities that hold more than 1,000 BTC in their wallets. Bitcoin addresses like (1P5ZEDWTKTFGxQjZphgWPQUpe554WKDfHQ) have more than 110,000 BTC in their possession. These kinds of wallets and accounts have the ability to move the markets their way and can also create massive selloffs if they so wish to.

While you might question why they would like to do so. One reason could be to buy back the Bitcoin at a lower price. The reason why whales can manipulate the market so heavily is that there are not enough people in the market to balance the distribution of Bitcoin. The more people who own Bitcoin, the less volatile the asset becomes.

Remember that markets are about emotions and the more people there are, the less prone to emotional swings. There’s a balance to these things.

September 2021: There are roughly 2000 addresses that have more than 1,000 BTC.

Social_Media_AVATAR_2022_v2
Written By Juha Ekman

Table Of Contents

Services Used

More Alpha...