If you've been in the crypto sphere for a while, you might have noticed days where bitcoin's price behaves abnormally. Below is an example of such price action

It's called a Bart Simpson chart because it looks like this cartoon character's head.

Market manipulation is any act by big holders of an asset to influence the price action of that asset for their personal gain.

As a crypto trader/investor you should understand some investors own a whole lot of coins (called crypto whales) and they also have to take profit before you do. If they don’t, their assets will reduce drastically in value. It’s a race to dump your coins before others dump on you. 

Hackers and Ponzi Schemes do this often. Let’s say bitcoin suddenly rises to $20,000, everyone wants to sell, the guy who owns 100k bitcoins want’s to sell 10,000 out of his stack, he places a market order and just keeps market selling all the way down till he runs out of BTC to sell, this will cause a very big unpredicted red candle as you can’t know when a whale wants to sell. This kind of move would render your technical analysis void.

Bull Trap vs Bear Trap

A bull trap is a false signal, referring to a declining trend in an asset that reverses after a convincing rally and breaks a prior support level.

Basically what this means is that since these guys know you’re looking at the same charts and they can see obvious price levels where you might consider a “break out”, they are going to pump the coin up to that point and just after it passes that break out level, they will dump all their coins on you. 

It’s a bull trap because it solicits FOMO and makes you feel bullish

The move “traps” traders or investors that acted on the buy signal.

while

A bear trap, on the other hand, is the opposite. Instead of making you buy,  they make you sell your coins to them.  They will sell a coin continuously until it’s just below the point where the obvious support line is, to make you FUD and think “it's going down”. Once you sell, they will buy all your coins cheaply and send it to the moon.

Whales use bull traps when they want to dump and bear traps when they want to buy.

Stop-loss hunting

Stop-loss hunting is a situation where crypto whales attempt to drive the price of a coin down to a level where other traders have set their stop losses.

Example: Bitcoin is at $10,000 and there's a crypto whale who wants to buy bitcoin cheap. He has 10 million dollars cash but he doesn’t want to buy just 1000 bitcoin at that price so what does he do? 

He sells 1 million dollars worth of crypto to try to drive the price down to $8200, and because a lot of traders might have set stop losses at that price level, his sell order immediately triggers other peoples sell orders which then leads to even more coins being sold, further driving the price down causing a Domino effect. Eventually, it gets to $5,000 and then he buys 2000 bitcoins at that price instead of just 1000.

This is the game of stop-loss hunting

Conclusion

The best way to avoid getting affected by market manipulation is to simply HODL your assets.

All forms of market manipulation are short term, in the larger scheme of things, no matter what they do, Bitcoin doesn't budge.

If you would like to learn how to stop FOMO and FUD then check out this article. I hope you found this post useful. If you did, subscribe and upvote for more posts like this. Have you been a victim of market manipulation? Share your experience in the comments. Cheers!