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Bitcoin Flash Crash Proves Whales Are Messing With Us

Ben Brown
Last Updated March 4, 2021 2:39 PM
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The bitcoin price dropped almost $400 in a matter of minutes on Sunday evening before immediately paring losses. The flash crash and quick recovery is an obvious sign of bitcoin whales playing mind games. 

While it’s impossible to know exactly what happened, the price action looks like a classic bear trap . A handful of large players initiated a sharp selloff, luring other traders into opening short positions. The whales then immediately started buying, forcing traders to close out those positions at a loss.

Bitcoin whales triggered a bear trap late on Sunday, typified by a flash crash and quick recovery. Source: Trading View

It’s a game. In this volatile range between $9,000 and $13,000, the whales are initiating and capitalizing on short-term swings. 

Bitcoin price stuck under $10,000

The bitcoin price remains firmly below the psychological $10k barrier. The short-term trend remains bearish with most analysts still predicting a sub $9,000 bitcoin price before the long-term uptrend kicks back in.

On Monday, the BTC price settled around $9,605, having fallen 30 percent from the local high of $13,785. The long-term outlook remains bullish and 30-40 percent pullbacks aren’t unusual for bitcoin, even in a bull market.

Bitcoin whales still dominate the market

Even though the bitcoin market has evolved significantly over the last two years, a majority of BTC is owned by a small number of individuals. They can exert pressure on the markets to form patterns and lure unsuspecting traders to take their bait.

As trader Josh Rager explained in a tweet last year:

“Whales and Wall Street like to play mind games. One of these includes making the market extremely choppy to make it difficult to trade.”


A classic bitcoin bear trap

Another popular bitcoin trader correctly predicted Sunday’s price action before it happened.

Livercoin saw the bear trap setup coming and it played out almost exactly as analyzed. Whales forced down the price, tricked traders into opening short positions, then forced the price back up. Anyone with a short-position was forced to close out their shorts at a loss. The whales then scooped up all the liquidity, with the likely intention of doing it all again.

Long, sustainable bitcoin price run is coming

If you can ride out the short-term volatility, you’ll be rewarded, according to analyst Willy Woo. As CCN.com reported, the market is simply laying the foundations for a stronger price run.

“Stage 1 of the bull market is completing. Once we bottom, stage 2 begins, promising the long sustainable bull drive that takes us through all of 2020 (if BTC continues its personality). Stage 1 was trader-driven dominance squeezing us up and driving fomo.”

If his analysis is correct, the ranging volatility will soon disappear and a stronger bull run will take hold.

Click here for a real-time bitcoin price chart.