Hours before the ten percent dump, a crypto “whale” transferred 25,160 BTC to Coinbase, amounting to $213.4 million. This spiked fear on crypto Twitter and was followed by bitcoin briskly breaking it’s $8,200 support and the $8,000 psychological zone.
Emotional Manipulation over Price
This entire advent goes to show that an actual large scale liquidation isn’t necessary to cause a cryptocurrency dump. The psychological fragility in crypto is proving to be a far more useful tool than volume-based price action.
For years, experts have advocated that markets are governed by behavior and nothing else. When it comes to stocks, most believe fundamentals are what dictate how a stock is priced in the market. But these fundamentals essentially lead to a specific type of behavior.
The consensus in the way investors treat a company ensures fundamentals and price have a direct correlation, but causation cannot be proven.
Cryptocurrencies are much more susceptible to emotional manipulation than any other asset class as they thrive on euphoria and tail risk.
The NVT indicator, which measures network activity, is considered fundamental for Bitcoin. A bump in the NVT is a strong sign that Bitcoin will likely follow. Once again, this drives investor sentiment in a particular direction, which further confirms the claim that emotions are the true kings of the market.
Blaming Manipulation for Dumps
A readily observable trend is that when BTC rises, everyone is quick to say adoption is here and fundamentals are picking up. When a dump occurs, the reason always appears to be whales manipulating the price with massive dumps.
When BTC flew from $3,100 to $9,000, there wasn’t a soul who called it manipulation, but when it fell from $9,000 to $7,900, the claims of manipulation resurged.
This incident very clearly highlights how easy it is to create any narrative and watch it gain traction through social media.
Moreover, chart analysis dictates there was a minor correction on the cards, with many reputed crypto accounts calling for BTC to hit $7,200 at the least.