How I picked up bloody chips in the crash
At three in the morning today, when ETH suddenly broke below $2800, my phone vibrated nonstop. It wasn't panic, but excitement as that group of 'Wall Street wolves' in suits started directing a familiar good show again.
Watching the glaring big bearish candle on the trading software, I slowly lit a cigarette. This scene was too familiar: news of the Bank of Japan's interest rate hike started to ferment a week in advance, and institutions had already written the script for 'closing out the yen arbitrage positions', just waiting for retail investors to obediently take the bait.
Sure enough, the sharp drop at nine in the morning directly caused over 420,000 long positions to be liquidated, and the exchange was flooded with stop-loss orders like a waterfall. But on-chain data tells me another story: the top ten non-exchange Ethereum whales held their positions steady, even swallowing nearly 80,000 ETH around 2780. This is not panic, but a meticulously planned 'please come into the urn'.
01 Classic Scripts of Market Manipulation
The tricks in the cryptocurrency world are never new; they just wear a different mask to take the stage again.
The 'price suppression and accumulation' tactics of the market makers have become as natural as breathing. They deliberately lower prices to trigger stop-loss orders, and then quickly buy up the panic-selling chips from retail investors at low prices. This strategy is particularly effective in cryptocurrencies with low trading volume and poor liquidity.
Not to mention those blatant 'pump and dump' schemes. Market makers first place a large number of buy orders on the order book to create a bullish illusion, attracting follow-up buyers to enter the market, and then quickly withdraw orders to short. Such operations have almost become routine in the cryptocurrency world.
Recalling the great performance of Litecoin in 2021, someone fabricated fake news that Walmart accepted LTC payments, causing Litecoin to surge 28% in an instant, only to be rapidly dumped, resulting in a liquidation of $200 million within an hour. Those investors who chased the rise are still waiting for an opportunity to break even.
02 The Truth Behind On-Chain Data
True traders never just look at candlestick charts. On-chain data is the X-ray machine that reveals the truth of the market.
When prices plummet, the key is to observe the movements of whale addresses. In the past three weeks, these big players have quietly increased their holdings by 1 million ETH, while exchange inventories continue to decline. What does this mean? The real smart money is accumulating chips, not following panic selling.
The distribution of Bitcoin holdings speaks volumes: as of the end of 2020, there were 2,260 Bitcoin addresses with balances exceeding 1,000 Bitcoin, collectively holding about 44% of the circulating supply. These whales are fully capable of influencing market trends.
Behind today's rebound is the result of institutions leveraging market sentiment with a small amount of capital. They place buy orders at low levels and then create panic through news, easily collecting retail investors' liquidation orders. This type of operation requires relatively little capital because, during extreme volatility, market liquidity is actually very fragile.
03 The Hidden Dangers of Options Expiration Day
Every options expiration week, market volatility tends to increase. Currently, about $23 billion in Bitcoin options contracts are set to expire next week, accounting for more than half of the total open contracts on the Deribit platform.
Especially with Bitcoin put options with a strike price of $85,000, about $1.4 billion in open contracts have accumulated, which may create a 'gravity effect' on spot prices. What does this mean? Large institutions have a strong incentive to keep prices below certain levels, rendering most options worthless.
Ethereum is also facing a test: its key support level is around $3,875, and if it breaks below, it could drop to $3,626 or even $3,403. The fact that ETH rebounded to $2,985 this afternoon, just below the psychological level of $3,000, is certainly not a coincidence.
04 My Coping Strategy
In the face of such a highly controlled market, I have formed my own survival rules:
First, never chase highs or sell low. This morning, when the market was in a panic, I placed a bottom-fishing order at $2,800, and this batch of chips has now gained nearly 200 points in profit. Nevertheless, I have already instructed the team to reduce our position by half. During times of increasing uncertainty, maintaining flexible positions is more important than pursuing maximum profits.
Secondly, pay attention to the divergence between macro sentiment and micro signals. The Bank of Japan's interest rate hike was originally negative, but after the market digested it in advance, a rebound occurred when the news landed. This is a typical 'buy the expectation, sell the fact.' What truly influences the market is not the news itself, but the gap between the news and market expectations.
Thirdly, be wary of the impact of liquidity drying up at the end of the year. Institutions often reduce their holdings of risk assets to lock in annual returns. Coupled with the approaching Christmas holiday, trading volume decreases, and any small mishap could be magnified. In such a market environment, I would rather miss opportunities than take unnecessary risks.
At dusk, ETH indeed encountered resistance and retreated at the $3,000 mark, now oscillating around $2,900. Someone in my community asked if they should add to their position, and I simply replied: 'Remember, whales are never kind enough to help retail investors break even; the chips in their hands are not easily relinquished for a mere 300 points.'
As the lights outside begin to shine, I glance at the half of the cash still left in my wallet. The drama in the cryptocurrency world never ends; the key is to keep the ticket for the next more exciting show.
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