Crypto Trading Trips: What are Whales and Sell Walls?
This article explains the concept of whales and sell walls in crypto trading, and how entities with large holdings manipulate markets.
From my own personal discussions and research, there seems to be a lot of confusion as to what exactly a ‘sell wall’ means in crypto trading. I thought I would try to break it down and clarify the great ‘sell wall’’ mystery for beginners and advanced traders alike.
Before we go ahead, let’s break down some of the key concepts first:
Whale: In the crypto world, a whale is an entity with a significantly large position in a specific cryptocurrency, usually accumulated by wealthy individuals and early stage (private sale/presale/ICO) investors. In order words, a whale owns a large percentage of traded coin volume or total supply. Whales usually accumulate large positions discreetly, without triggering major market reactions.
Order Book: The order book lists all active buy and sell orders that are placed on a trading exchange. This data is prevalent on the trading screen or advanced setting of almost every crypto exchange. It allows traders to get a good sense of market depth, see what the highest and lowest prices are for active orders, and get an overall sense of market sentiment (example below from Binance).
Now let’s get down to business.
Sell walls are essentially created by large blocks of sell orders at a specific price. The wall is created to prevent sell orders from executing at a higher price than the price set for the ‘wall’ and causes downward price pressure on a given cryptocurrency. It is the reason why sometimes a certain coin’s growth is slowed down or stunted in the short term.
As a beginner, you can view a sell wall by going to the ‘depth’ screen on a cryptocurrency exchanges and looking at the green side (buys) vs the red side (sells). When the red side is a lot greater than the green side, it means there is a large sell wall which will keep prices down.
There are two main types of sell walls:
Real Sell Wall (RSW) – This wall is usually created by real purpose such as: negative company news, negative sentiments, failure to meet certain project goals, hacks, scams or due to panic selling in a bear market. Real walls have usually been up for a longer period of time and are close to the top of the order list, especially for coins that have relatively high trading volume. These sell walls occur for valid reasons associated with the specific company or crypto market pessimism as a whole, and the wall will usually be progressive and staggered, like the image below.
Fake Sell Wall (FSW) - This wall is typically created by Whales or ‘pump and dump’ groups for market manipulation and can be temporary imposed for quick flash trades or for longer periods of time. These can be orchestrated by an organized group, individuals, or trading bots (a specially programmed algorithm with certain conditions that trades for you automatically when certain events are triggered). These walls can appear/disappear at any time, including times when the cryptocurrency market is on a positive upward trend, when companies release positive news, and other times when large selling pressure just wouldn’t make any sense. These walls are usually non-progressive and look unnatural like the image below.
Generally speaking, when you see a sell wall it’s usually not a good time to get into that specific coin, as it indicates there is downward pressure on the price, so you may be able to buy in at a later point for cheaper.
That being said, you must also be aware of whether it’s a real or fake sell wall as fake walls can appear and disappear in an instant. You need to be aware that whales can manipulate the price and trade with caution, especially if you are day trading.
Whales can set floors and ceilings for price movements. What I mean by that is, Whales may place large – unfillable sell orders to keep the price low in order to buy more coins at a cheap price. When they are done buying, they can remove their sell orders, which created a wall, and then allow the price to increase upwards. This is how the whales win. They rinse and repeat the process over and over again, for constant gains.
As a beginner, you may find yourself selling too early and essentially ‘feeding the whales’. When trading cryptocurrencies, it is advised that you do your own research and don’t let whales manipulate you to sell your coins for cheap.
Disclaimer: Nothing in this article is to be construed as investment advice. Neither the author nor the publication takes any responsibility or liability for any investments, profits or losses you may incur as a result of this information.