Let us check the crypto situation. On Sunday, an unknown entity unloaded roughly $1 billion amid a time of low volume and liquidity for bitcoins. Afterward, there was some consensus on the cause in retrospect.
It was a well-planned move. When the price was nearing, there was a movement where a buyer starting to buy coins in the spot market.
So, the investor built themselves a position. Then, he put in a large market order.
Once he accumulated a big enough short futures position, he sold the previously purchased stash of bitcoins at market rate when the market exhibited low liquidity again.
So, all the bids in the order book are out. Thus, this resulted in a price crash. This ignited as he built his position before a short position with futures.
Here is an example of how this is done.
Let us say that bitcoin is trading at $9.9k, and the critical resistance is at $10k.
With about $1 million of cash at an average price of $9.9 k, a trader builds a stealthy position of 100 bitcoins. Afterward, he puts a market order. They would buy a hundred bitcoins at the time when the market liquidity is low. Thus, this pushes the price instantly to $10.4k.
That means that his average position is 200 bitcoins at $10,150. The move above the visible resistance price causes other traders to buy above $10k. Moreover, it catalyzes a short squeeze that forces short traders to cover their position by buying back the underlying asset. So there comes an upward pressure on the price of this underlying asset. This means that phase one of the traders’ plan is complete.
Now bitcoin sits at $11.8k. Thus, a trader that manipulates the market can start to build a short futures position with 30x to 50x leverage.
So that is the strategy the trader who unloaded around $1 billion used.
- Trading Instrument