This is a graphic from yesterday (BitMEX:BTC, 1minute candles):
enter image description here

A price drop from $4000 to $3730 in 7 minutes
Volume in those 7min was $140M

Is possible that something like this happened (numbers are just an estimate to make it easier to understand the strategy)?:

1) Half of that volume was a market sell (short) from one person (whale), but with 100X leverage => one person shorting $700K
2) That short make the price drop from $4K to $3900
3) Average entry for the whale short is then $3950
4) That drop fired a lot of sell stop losses orders (by the other $70M)
5) Those stop losses make the price drop to $3800
6) The whale is in profit (short entry $3950, current price $3730)
7) The whale starts to close the short position, but slowly, to avoid moving the price, average close = $3850
8) The whale earns 2.5% (3950/3850) of $70M = $1.7M in just a few hours?
it started with $700K and now has $2.4M!? and the worst part is that it can do it again and again?

Even if the numbers are not correct, is possible for a whale to do something like that and not only move the market but also take profit on that movement, without any risk?

I think this should not be possible, because is too easy. But I cannot understand what is stopping a strategy like that to actually work.

Can somebody help me to understand what is the problem with that strategy?

EDIT: I can see a downvote and no comment, please if you are going to downvote at least explain why so I can learn to ask better or edit the question.

  • 1
    There are some close votes citing "Questions on current or future market values, energy costs or service provider availability are off-topic as the answers are changing too frequently to be useful to others.". This question is not about current market values, it's about a mechanism being used to manipulate the market explained with help of a recent example. – Murch Jan 12 '19 at 14:51

This is a standard scheme for stocks, and it of course works for crypto-currency as well. It is considered unfair and therefore not allowed in the stock markets.

Crypto-Currencies are mostly unregulated, so it is legal to do.
Feel free to join and do it too.

  • so you are saying that strategy works? it does not make sense,because is so simple that as you have said anybody with less $1M could do it. Why the big investors will fight in stock market then instead of just using this strategy in crypto? To me is obvious there is a problem with the strategy but I cannot understand what it is – Enrique Jan 12 '19 at 1:55
  • It is illegal in the stockmarket. The regulator watch for it, and they'll come after you if you try it. – Aganju Jan 12 '19 at 4:43
  • I know, what I'm saying is that why the big investors are trading in stock market if they have the chance to trade so easily manipulating the crypto market? – Enrique Jan 14 '19 at 22:31

Turns out that this was illegal for BitMex as well.

See their federal indictment: https://www.justice.gov/usao-sdny/pr/founders-and-executives-shore-cryptocurrency-derivatives-exchange-charged-violation

enter image description here

  • What is the relation with this topic? the problem there was with the anti-money laundering policies, not market manipulation – Enrique Dec 18 '20 at 12:19

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