A sudden drop in the cryptocurrency market often leads to a phenomenon known as “whale trapping.” This tactic is used by influential investors, or “whales,” who hold enough capital to influence market dynamics in their favor. Here’s how they typically execute this strategy:

1. Massive sell-off: A whale triggers a significant sell-off, causing widespread alarm among smaller investors. Seeing the sharp drop in prices, retail traders start selling their assets in fear of further losses.

2. Ripple effect: As more investors rush to sell, the downward pressure increases, leading to a sharp drop in prices. This panic selling creates a snowball effect, pushing the market even lower.

3. Re-accumulation: Once the market has bottomed and prices are low enough, whales will come back in and buy assets at a discount. This move restores market momentum and allows them to increase their holdings.

The tactic is designed to exploit emotional reactions, rattling less experienced traders while allowing whales to acquire more assets at bargain prices. It is a familiar pattern in unregulated and highly volatile markets, especially in the cryptocurrency space, where such manipulation often goes unchecked.

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