What is a "Whale Trap" strategy?
A "whale trap" is a strategy used by large cryptocurrency holders, often called "whales," to manipulate the market.
Here’s how it generally works:
Sell-off to Trigger Panic: Whales may sell a large amount of a cryptocurrency to create a sudden drop in price. This can cause panic among smaller investors, leading them to sell their holdings out of fear of further losses.
Buy Back at Lower Prices: Once the price has dropped significantly due to the panic selling, the whales then buy back the cryptocurrency at a much lower price. This allows them to accumulate more of the asset at a reduced cost.
Price Rebound: After the whales have bought back enough, the price of the cryptocurrency may stabilize or even rise again, leading to potential profits for the whales.
This tactic takes advantage of the psychology of smaller investors and market volatility, allowing whales to increase their holdings and influence the market.