Yes the title is pretty much a clickbait but honestly this article can help prevent you from being conned out of your hard earned money when trading in the crypto markets. Yes there are people out there, mainly institutions or the so called “whales” who just want to make a huge profit in your expense. And how do they do that? Well by using fear and greed. Admittedly it is not completely their fault that smaller investors are being “cheated” as we (smaller scale investors or retail investors) tend to be more prone to be influenced by fake news or information. And market manipulation is the key to everything.
For those who don’t know – FUD stands for Fear, Uncertainty and Doubt. To put it simply, it makes you so afraid of the market that you sell your cryptos or stocks at a (substantial) loss. FOMO stands for Fear of Missing Out. Basically it makes you so bullish that you will buy overpriced cryptos or stocks that institutions are hoping to dump off for a huge profit. If you look at the history of stock trading, you will see that this is actually pretty commonplace. Wikipedia has some interesting articles on how FUD and FOMO is being used in the past here.
The Coin Bureau youtube channel also has a very good video on what is happening to the markets these few weeks. And how these whales have been playing us all these time. Please check out their video below. The things in the video might or might not surprise you. But it gives a good insight on what is happening. I know this is not something very popular but it is something every trader should know.
Here are some of my tips when you are trading to help spot such market manipulation in the crypto market and what to do. They are by no means comprehensive but it should give you a rough idea when market manipulation is going on.
- News articles or videos that tell you that a certain coin will never drop below a certain value and it is now the LAST CHANCE to get the said coin at this “low” price. I have seen a lot of articles and videos claiming such wild predictions but most of them never come through. Something along the line that the price will go up to the moon or blast off and will never come down. Sure not all of them are from big institutions as some authors are actually holders of those cryptos themselves. But still these are mostly market manipulation. They want to pump up the price so as to sell at a higher price at a later date. And how about that Bitcoin Mining Council started by Elon Musk? Very very interesting to say the least.
- News articles or videos telling you that the doom is near and you should dump all your coins now. Crypto WINTER is coming! Same as the first point, this is trying to trick crypto holders into selling their coins at the low price. Institutions wanting to get into the market do not want to buy cryptos (or even stocks) at the market value. So what do they do? They manipulate the market, creating an environment of fear and uncertainty and buy when retail investors sell their cryptos, all at a much lower price. There are also targeted dis-information on certain coins as well. Of course there are legitimate news as well. It is indeed a very fine line between the two.
- Articles saying that someone made millions in crypto trading. Yet one of the ways such big interests try to persuade us to over-invest in crypto. And yes surely you have read some article stating exactly that. And yes some might even be true. There will always be a number of people making it big in the stock or crypto market. But those smaller investors making it big should be pretty small compared to those who didn’t make it at all. For every one of those windfall investors, we might get like ten of those who didn’t succeed. And even big time investors got burnt themselves. There are even bigger fishes out there. If you are still convinced that crypto market trading will make you a millionaire overnight, you should read about Archegos Capital Management. It is a recent story about how even BIGGER institutions swallow up others.
- Wild swings. This should be pretty obvious. If you see wild swings in either direction in the crypto market (especially now when the crypto market is somewhat relatively more mature), you should know that someone is pulling strings somewhere. Of course it could also be caused by “bad news” regarding the crypto-sphere but in most cases, it is mostly “people” disseminating false or fake information or rumours. The recent crash in the Crypto market is proof of that. Even the Crypto king Elon Musk is guilty of that. The recent “China bans Crypto” meme is also one of those old rumours being circulated on the Internet but made huge. And so what have changed? Absolutely nothing changed. Yet the markets bounced back immediately after that major crash.
- Institutions buying crypto. We will often hear news about this major institution adding this certain crypto worth certain billion of dollars into their portfolio. When you hear these kind of news you will probably think it is a good time to buy in. But really? Is it really a good time to buy in AFTER their announcement? And you will be surprised that some institutions do sell portion of their holdings when they have the chance. The same goes for our favourite Elon Musk and his Bitcoin holdings. It was later revealed that Telsa did sell a portion of their Bitcoin stake.
- Keep calm bro. This is not just a meme. This is true. When you panic, you cannot think straight and you made rash decisions and you get burnt in the market. This has happened time and again. That is what these whales are trying to do – create an atmosphere of fear or greed making us do stupid things. Of course it is easier said than done. I myself got burnt when I first started trading. Lost quite a chunk of my BTC investments. So now what I do is trade in smaller amounts over time. And if I am able to make some profit, I will just sell. Don’t worry about the “loss in profits”. Can always make it back seeing how volatile the market is anyway. Keep calm and stick to your trading strategy.
- Don’t leverage. This is something very difficult to do. But a lot of retail investors do leverage when the market look good thinking only profits and profits! The problem with leveraging is that it creates these wild swings and thus further damage the market. Just imagine you place a low price buy order with leverage like BTC expecting that you can get a good deal if it drops to that level and you go to sleep. The next day when you wake up you see having some “extra” BTC but seeing the market price of BTC still dropping or lower than what you had purchased the BTC. What would you do? Panic and sell to cut your loss? That is what I would do. And that creates the environment where market manipulators can more easily manipulate the prices to their advantage.
Getting burnt in the crypto market honestly sucks. Been there, done that. But when money is concern, there will always be manipulators. And the biggest manipulators are the ones with the most money. Don’t let them get hold of your money! They have enough already!