A Case Study of Bitcoin Order Book Manipulation


If you are new to crypto trading, you may not use order book data to shape your trades, but advanced traders always use it to take a picture of demand and supply as well as the support and resistance levels. <br>Order book manipulation is used to mislead those traders and only the experie

In my last article, I discussed possible market manipulation, where bitcoins are dumped in order to drive the price down.  

 

Today, I have another piece of evidence for such manipulation. But before that, we need to understand why the market is manipulated.

According to Wyckoff, the brilliant mind who invented the famous Wyckoff Method, this level of market manipulation is just a part of the game and very hard to stop as the methods used are difficult to prove as market manipulation. The main reason is this is how smart money accumulates as many bitcoins as possible expecting a considerable price appreciation in the future, maybe weeks, months or even years.

 

However, these ruthless acts of smart money contribute towards the betterment of the market as well due to the fact that most paper hands are shaken out of the market at this point before beginning the mark up phase which is known as "bull run" by many of us.

 

Obviously, a strong bull run cannot be maintained with paper hands as they are the ones who easily get panicked and dump their crypto first. We need stronger hands than that for a strong bull run.

 

During the last weeks we saw lots of negative news and this week we have started to see some positive news. I bet we will see more and more positive news in the coming weeks. It is also one way of manipulating the market, which may be a topic for another day. 

The smart money creates news in the direction they want the market to move and you can take one "famous CEO" who talks about bitcoin and map his statements on a timeline to see the meaning of what I just mentioned. You will see what I see. 

 

Want to learn market analysis? Read more Real Life Case Studies Here


 

Anyway, above is a screenshot of the Binance order book taken on 20/07/2021. 

If you are new to crypto trading, you may not use order book data to shape your trades, but advanced traders always use it to take a picture of demand and supply as well as the support and resistance levels. 

Order book manipulation is used to mislead those traders and only the experienced traders could avoid being manipulated under this scheme. Others get victimized. 

The easiest way to avoid these manipulations is "don't day trade". It's the best way, as these schemes are designed to "hunt the hunters".

 

This manipulation method is known as Spoofing, where orders are placed in the order book to either buy or sell but not with an actual intention of buying or selling. Rather they want others to see those orders and make decisions to buy or sell in the direction that the manipulator wants. 

 

On The sell side of the above screenshot, at 30k level, we can see an above average number of bitcoins are for sale. In this case, it appeared that this was a genuine sale but not because they wanted to sell but because they wanted to stop the BTC price from going beyond 30k. Therefore, essentially the intention appears to be to keep the price under 30k for some time. 

 

Then on the buy side, there are a huge number of orders, but one in particular at 29k. If you check the charts now, you will see that the BTC price was strongly supported at 29k during the last couple of days, which is what we call a "successful test". The shown order for 726 BTC was not a genuine order but it made the others jump in and buy around that price. 

 

If you check the trade volumes around this price range, you will see above average numbers and one may think it's just because the price was very attractive and therefore many people were interested. But, it's not that simple I am afraid. 

Many people were interested, because they were cornered or funneled to be interested in this price range. They were told to buy in this area. Sounds like a conspiracy theory to me. It is indeed. 

 

After this successful test, the smart money allowed the market to move beyond 30k and that is what we can see by the time of writing this article. However, we need to expect more tests in the coming weeks as well. 

 

Now, what if the test failed like many of the tests before in the past few weeks? (maybe another topic for another day.)

That is why the 28.5k and 28.2k orders are already set in their places in the order book. 

 

In my opinion the smart money "DO NOT" want to let the price crash below 28k and they defend it with 3 strong battalions as we can see above. Why? 

 

Another huge market crash, and many people start complaining, small investors go bankrupt, authorities want to enforce more regulations and controls,... sounds like the smart money is not going to make money either to me. They are the "smart money" and they are not stupid to kill their cash cow for meat.  

 

These are just my point of views, observations and opinions through the lenses of Wyckoff Analysis and not financial advice at all. 

 

Dr. Buddika Adikari          


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