Crypto Smackdown : Straight from the Playbook
A big, sharp move that goes straight through a Technical Support in light trade with no real news behind it? Well, you’d be right to ask questions about a move like that. The Crypto Market has taken a 15-20% hit across the board over this last weekend and nobody seems to be able to give a credible explanation why. Does that seem strange? It seems strange because it IS strange.
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Some people have tried to pin this on a “Sell the News” type of event relating to EOS, but I’m not buying that story. EOS is still only the 5th largest Crypto by market cap and while one day I do hope (and expect) that it will lead the market, it’s not ready to do that yet. It’s a bit of an insult to the Bitcoin and Ethereum communities to suggest the whole market is now following EOS. There is more to this story than that….or maybe there is less….?
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I’ve seen this kind of thing before. I’ve been watching the Precious Metals market for years and it is commonly referred to as a Smackdown. I’ve seen numerous times where someone has dumped a large contract (sometimes billions worth) in thin overnight trade and made a significant market move. You have to ask that if someone has that much to sell they would stagger their trades and sell into volume if the objective was to try to maximise their sell price…..but if the objective is to impact the price itself, well then dumping in light trade makes perfect sense. Sometimes the establishment media even has the gall to suggest it was a trader with “Fat Fingers” who made a mistake by selling so many contracts. Just like the Crypto markets, you might hear all manner of ridiculous explanations for a big market move but I’ll give you one that you probably won’t read about anywhere else.
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The purpose of a Smackdown is to manipulate the price of the underlying asset for the purpose of creating, or breaking Technical Indicators. In its crudest form you could call it a simple Stop Loss Raid, where the objective is to clear out all those Stop Loss orders that have been placed under the market from Traders going Long. In this case though, I think this is really about manipulation of Technical Indicators. One thing I have noticed about the Crypto market is that it is dominated by Technical Analysis. It seems like every man and his dog is drawing lines on the chart and predicting the future with them. I wrote about this in my piece The #1 mistake most crypto traders make and I also touched on it with Explaining Weekend Volatility with Trader Profiles and Psychology. If you’ve read that then I think what we are seeing broadly is the Fast Cash Chasers getting their asses handed to them as they are being hounded out of the market, the Technology Gurus are HODLing (and hurting) while the Professional Traders are patiently waiting for the bear cycle to play out. But I digress….
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Have a look at the above chart and you can see how easy this is if you want to manipulate the market. All you need to do is break through a major support line by dumping in light weekend trade and you can trigger a wave of panic from all those geniuses out there following Technical Analysis with no idea what’s really going on because they will then do the rest of the selling for you. What’s really going on is a lot of positive news, a lot of exciting projects being launched, even the regulators are finally coming on board and realising they don’t want to kill the goose that might lay the golden egg for them. We are on the verge of a genuine Golden Age for Crypto Tech. So don’t fall for this market manipulation and technical sell off. I’m buying today and this week I am going to start playing with CLEOS. If you don’t know what that is then keep reading because I will be posting about it.
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You're one of the few people on here who I actually read when it comes to TA/price since you actually provide some original thought (unlike most--not all--the wannabe analysts on here). And you're right, the crypto markets are definitely manipulated.
Thanks @choogirl it is funny that on the old forum I would post I'd get slammed for even hinting at there being market manipulation. Even when it's clear as day and people are being found guilty of manipulation in a court of law.
I think it's pretty obvious when you know what to look for.
I have been trading for a while starting with forex. I discovered in my trading Bitcoin last year that applying forex principles was not working. Maybe it is not enough history for good TA. Maybe it was thin volumes spread across multiple exchanges. What I did notice was a Friday effect. Go back to March to September and you will see some 80% of smackdowns happened on Fridays during Europe/US hours - i.e., after China hours. I changed my trading model away from a forex model to trade with no stop losses - just big account margin. End of smackdown risk for me. More risk but not stopped out either.
I will be happy to add that word to my blogging vernacular.
I too have seen this trend of most moves occuring in the weekend due to thin markets. This clearly shows some type of manipulation. However, this can go both ways as shorts can been squeezed too which is what happened last time we were down here.
It's very interesting. I wrote about the weekend trading about 7 months ago but I've noticed that Fridays have become more frequently volatile since. I think it might be because people started getting afraid of the weekends and were selling early.
Thanks for sharing your experience and knowledge of forex. I don't know forex very well but I've heard TA is strong there too.
My theory about Fridays also extends to when the Bitcoin miners have to pay their staff and other bills
Resteemed, you have got me intrigued what is CLEOS.
Is it some some way of trying to leverage an EOS trade. I think EOS will do very well this year, I don’t like leveraged margin trading, but if there is some way to get an call option or a warrant on EOS over 12 months, without being exposed to margin calls, it would be a good way to trade it.
It is the Lightweight Client that has been released for EOS but basically only works from Command Line. I haven't looked into it yet but figured it would be worth playing with this week if I can get hold of it and get it to work.
Great article buggs!
btfd y’all!!!
Thanks. Good luck if you're buying some today mate.
Cheers buggs, today or tomo...
Pump and dump, funny thing is there was no pump. Manipulation at its finest, just ask any silver godl stacker. We've been going through this for years. Nice write up brotha.
Thanks mate. I know I'm probably preaching to the choir here at #SteemSilverGold but there are just so many who've only had experience with Crypto Trading that will fall for this old trick.
the only 100% thing in my mind is as you say that they can manipulate the market and do it. even if we break it in smaller scales we can take a new coin that mostly nobody buys and it's extremely new and cheap and with a bunch of 10 friends buy a large quantity we can easily then manipulate the market around the coin. that was the simplest example i could think of
Yes, or you can do what they did with SBD recently and wait for an exchange to suspend deposits/withdrawals on a coin with low holdings on the exchange and then pump it massively so that it throws out the average price on coinmarketcap.com so as to convince (almost) everyone that it's on a rally.
you couldn't be more accurate :P
This is a great write up! I appreciate your words of wisdom, it helps crypto-noobs like me feel better.
You are very welcome. Glad to hear you got some value out of it :)
Intermediate term, yes big time shakeout of the peeps who bought 15k right here. Sellers have been pushing this down for weeks now. Chance bitcoin has bottomed is about 0%. We are going lower. Give me the panic and i flip BULLISH!
https://steemit.com/cryptocurrency/@heyimsnuffles/crypto-carnage-is-imminent-20180610t190128430z-post
Yes, I am always on the lookout for the capitulation low. We might bounce hard off 6K on volume and make a really nice looking double bottom. The TA crowd will love that ;)
Excellent explanation and rigorous argumentation, I love it!
Thanks a lot for the heads-up and all this info, much appreciated on this end.
Namaste :)
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