If every single investment vehicle available in the market would be written down in a catalog, no doubt, the cryptocurrencies section would be the most exciting and risky of it. Trading them on a daily or weekly basis adds a bit more of spice to this combination.

The crypto trader can face a roller coaster of emotions throughout the day fighting for profit. And even though it is more than proven that the cryptocurrency market can be highly profitable. Several players and circumstances play a role in their price, which makes them very volatile.

When trying to survive in the wild, wild west of investments

    1. Whales

“Whale” is a term commonly used in the cryptocurrency market. It refers to investors that can manipulate the market due to the large amount of assets they hold.

Most crypto traders try to avoid markets where whales are very present. What are they scared of? As in the ocean, where the big fish eats the small one, the crypto market behaves in a similar way.

These big investors try to constantly increase their holdings by taking advantage of the retail investors. Stop-loss hunting and spoofing are some of the techniques they use to eat you in the market.

Stop-loss hunting consists of whales pushing the price down, for example, below a support where many traders are likely to have set a stop-loss order, in order to trigger all those stop losses. After all these sell orders have been triggered, the whales will come back to buy at a cheaper price.

Spoofing is different, it is about setting a very, very large order in the bid (buy) or ask (sell) side to change the expectations of the retail traders. In this way, they think that they have spotted a whale in the market and want to be on the same side setting orders just in front of that one. But, just before the whale order is going to be triggered, it is removed from the order book, which is the poof, to take advantage of the small trader.

For example, if the whale order is placed on the bid side (a buy), the whale investor will wait until the retail ones are following him and, therefore, buying. Then, once the price starts increasing, the whale will cancel the order and sell his coins at a higher value.

a volume order wall

    1. Lack of volume for some pairs

Unlike other markets like forex, stock or commodities, the cryptocurrency market is very young in comparison. The main coin, Bitcoin, is 10 years old. However, most of them have around 3 to 5 years of existence.

This insufficient maturity for many pairs results in a lack of volume in less known and capitalized pairs. And since volume is the fuel for price movements and volatility, it makes them difficult to trade and very unappealing for any type trader but one, the pump and dumper that we are going to review in the next point.

    1. Pump and dump groups

Extremely illegal in regulated markets, this type of “trader” has found a gold mine in the cryptocurrency market. It is another way of market manipulation that consists of artificially pumping and then dumping the price of a coin to profit from the increases.

These pumps are not made by just one investor, these are made by large pump and dump groups where investors agree to buy one specific low capitalized coin at the same time. These groups can increase the value of a coin even up to 500% in some cases.

The size of these groups is sometimes huge. Currently, the largest pump and dump group known has more than 80,000 members, something that the retail trader should be aware of if he/she doesn’t want to be caught by the dumps.

top 5 risks for cryptotraders pump and dump

    1. Insider trading

While in every single existing market all the information that can affect the behavior of the prices and development of the sector must be public, the crypto market, again, is slightly different.

Since it is not a regulated market, players with privileged information, or insider traders, can take advantage of their lucky position to highly benefit from it.

Common examples are people working in large exchanges. Whenever exchanges like Binance or Coinbase add a new cryptocurrency to their platform, its value skyrockets. It can easily have a four-fold increase, and the people working at these firms know about it, which alters the price even before the announcement is made.

    1. Restrictive regulation

Is regulation good? Yes, it is. Can it alter the development of the crypto industry? For sure, for good and bad. Will it be represented in the charts? No doubt.

Cryptocurrencies are still a very young technology. Given their special nature for which they lie between a currency and an asset, it is pretty difficult for regulators to frame them in any existent regulation. Therefore, they need to figure out which role are they going to have in our economies.

Since such a key aspect like the rules of the game are not defined yet, once they will be implemented, it could affect the charts drastically. Up to a point where they could cause an earthquake in them if this turned out to be very restrictive with them.


Frequently, crypto traders make use of technical analysis to analyze the entry and exit opportunities, however, the cryptocurrency market is characterized by other factors that should be taken into account. The 5 points presented above will strongly determine your trading results, and leaving them out of your analysis can be a big mistake.

 

Check out our last blog: What Is A Stop Loss And How To Set It Up.