Core Logic of Wash Trading in Cryptocurrency: Understanding the Broker's Script to Navigate Volatility
After spending a long time in the crypto space, one may find that while there are many tricks employed by brokers, the "script" for wash trading remains consistent. The recent trend of a certain cryptocurrency serves as a standard case, which beginners can refer to.
1. Creating Despair: Squeezing Out Fearful Tokens
The price fell from 1.2U to 0.9U, trading volume shrank, and the retail group was filled with panic about "going to zero," with many cutting losses and leaving the market—while the broker quietly accumulated at the bottom. This step is not about the price; it's about human nature.
2. False Rebound, True Trap: Entrapping Bottom Buyers
The price first dropped to 0.7U, then quickly pulled back to 0.95U forming a V-shaped reversal. Retail investors thought "the bottom is confirmed" and frantically bought at the bottom, giving the broker another chance to dump, causing the price to fall below the previous low to 0.65U, and bottom buyers instantly became bag holders.
3. Panic Harvesting: Collecting Cheap Tokens
Negative news such as project teams running away and large holders liquidating broke out, causing the price to crash to 0.5U, and the market was in an uproar. However, on-chain data showed that large addresses were crazily accumulating—this is the broker's final step in harvesting cheap tokens.
4. Reversal and Rebirth: Completing Token Exchange
When retail investors fully resigned to their fate, the broker started to pump, and the price shot up to 1U. Those who cut losses regretted it, bystanders chased the rise, new funds entered to take over, and old funds successfully exited, completing a perfect exchange of tokens.
Core Truth: The essence of wash trading is "changing players"—washing out low-cost old investors and welcoming high-cost new buyers. A sharp decline is not the end, but the beginning of token restructuring. True experts do not get tangled in price fluctuations; instead, they understand the rhythm of wash trading and the script, allowing them to stand firm amid volatility.