On Sunday, August 2nd, the price of BTC (Bitcoin) declined by $12 in just five minutes. In the same period, ETH (Ether) dropped by 21%. Furthermore, similar losses were observed with many other altcoins. An unknown entity unloaded roughly $1 billion on the open market amid a time of low liquidity and volume. There was then a consensus on the cause in retrospect.
One would assume, at first thought, that selling such a massive amount in an illiquid market would be the detriment to the seller. Nevertheless, given the size of the move, we do not think the seller was unaware of what would happen.
It is entirely possible that the orchestrated move was 100% intentional.
It was a well planned out move. The move involved the buyer starting to buy coins in the spot market when the price was nearing. Furthermore, this was an obvious key technical point of resistance.
The investor built a position. Afterward, they put in a large marker order. This was to take down all the offers on the order book and to push the price sharply below a critical resistance level. A short squeeze was caused because of the traders who were short from this resistance level, at the same time.
The investor submitted the large market order. Thus, following the ignited momentum, now they would thus enjoy the price appreciation of the coins bought before the breakout.
After a time, the trader decided that it is time to ring-up the register. So, they quietly build a future short position on various exchanges using different accounts to be as stealthy as possible.
The investor can maintain the position even if the price of the underlying asset goes up by 2% or $3, using 30x to 50x leverage.
They have accumulated a big enough short futures position for themselves. Thus, they then sell the previously purchased stash of BT at the market rate.
- Trading Instrument