A few days ago I posted about a large sell order of 2.1 million dec sitting on the market.
At the time I thought it was just someone selling their DEC in a kind of clumsy manner.
However, the 2.1 million is still sitting there and there are some telltale signs that this order is not intended to be filled but instead meant to drive down the price.
Let's talk about it.
This is a screen shot from just a few minutes ago. You can see the order in question underlined in red. I want you to notice the position of the order. It's not pushed to the front but hanging back a few spots.
Now let's look at the screen shot I posted 3 days ago when I first saw it.
Notice the position? Not up front but hanging back a few spots.
Why is that important and how is this manipulation.
So an important thing to note that is not displayed in this picture is that this order pops in and out constantly and it never goes to the front of the line. When it pops up there is always a very specific placement. Somewhere between 3 and 6 positions from the front and always just barely out pricing some medium-large orders.
Here's the game. I want to push the price down. Maybe its to buy more and maybe its to get more dec per dollar when you want to sell some cards which you can push back up later. But for whatever reason, I'm a whale and I want to push DEC down.
What do I do?
Well, I take all my dec and I put a roadblock right in the middle of the sell orders. I don't actually want to sell, I just want to push the price down so I don't dare put my order in too close to the best price.
What I do instead if I slightly out-price a few bigger orders who are close to the best price but not too close. I just want them to see a giant whale undercutting them and have them realize they are never going to get to sell theirs so they need to undercut me.
Now, I'm just going to wait until a few bigger orders see that they won't get a sale until I sell all 2.1 million dec and decide they have to lower their prices to get in front of me and once that happens, I pull my order happy that I drove prices lower without ever selling anything.
Now the thing about this technique is it's one that only really works in illiquid markets and against new traders. And this is the perfect place for that. More on this later.
Oh, as I write this, the order is now gone again.
Continuing on...
Let me ask you this: If you were trying for days to sell your massive 2.1 million dec order so aggressively that you were posting the whole order at once causing a huge price shelf so big that everyone paying attention will undercut you and you;ll never be the best price, would you keep removing it every few minutes and never let it get to be the best price?
Probably not because it would never sell.
But the point isn't to sell it, in fact I first noticed this three days ago and you can see that not only has this order not gotten any smaller since it hasn't sold anything but its actually gotten bigger. Which means every time this person gets more dec they just add it to the order to make it even bigger.
What really tipped me off to this is that I'm trying to sell about 80k dec. I've changed the price 3 times and 2 of them, within a couple minutes of posting my 80k sell order this order has just popped up suddenly out-pricing me by the smallest possible amount. This doesn't happen when I price it at the best price. So I have no choice but to drop below and then it disappears.
In regulated markets, this is illegal. It's a form of "spoofing". It's using real orders you never intend to fill but changes the perception and structure of the market so you can get better prices. This is what JP Morgan traders have been charged with to manipulate the price of precious metals.
It's a bit of a different technique when they do it but in slower and less liquid markets this is an easy way to take a few thousand dollars and push a multimillion dollar market around however you want to. This can be used to push the market price up also and being that they have a huge holding, they probably will do that after they've accomplished whatever it is they are trying to do right now.
Since you've read this far it seems you might be interested in how markets work so here's a quick lesson that could make you a better trader and will also highlight another way this whale is manipulating these markets.
New traders get hurt by all the time by misreading this chart and I hate it.
It's the depth chart.
If you trade crypto or on Robinhood, these depth charts are often front and center. I've never been quite sure why since it's usually not as accessible on traditional platforms and most people use them wrong and lose money.
Oh, I just went to screen shot the depth chart and look who's back, three from the top trying to goad those higher 7 prices to come down.
Anyway, this next thing is the depth chart. If you've never seen one of these it's just a visual representation of how much inventory would need to be bought or sold before the market would reach that price.
You can see here what a 2.1 million dec order looks like on the big scary red side that dwarfs the visible buy side. If you took that one order out, it wouldn't look nearly as big and red and mean.
So as you can see, the intuitive way to look at this chart is to say, there's a wall of sellers and since more selling than buying leads to lower prices, a buyer would probably intuitively avoid buying here figuring it's probably going lower. I mean there are so few buyer shown here and it would take a miracle to overcome that mountain of sellers right?
Well yes. But not usually.
In more liquid markets, something very counterintuitive happens. Market participants usually heads toward liquidity and inventory. SO if there's a mountain of people waiting to sell at these prices, markets will start buying from them because whales can move a lot of capital without sending prices up. If this chart was reversed and there was a huge amount of buy orders and very little available to sell, any order of size that was put in would move price too much. Funds and whales buy into that resistance and sell into support because they have a lot of capital to move.
Most people get this wrong. They see a chart like this and they bet against it. As they are betting against it though, whales start taking bites out of it and creating a sizable position. Price doesn't move much but volume start spiking which alerts smaller traders who jump in but by that point the mountain is gone and those small traders start to push the price up. The people who have the buy order in see price moving with out them and they either FOMO in with market orders or they keep pushing their buy orders up in price.
Once the buyers run out and there's a whole bunch of people with buy orders in to buy that dip, this chart is reversed, newbies see it and decide its definitely going up and between that and the now huge green mountain of dip buyers, the whale has the support to sell without pushing price back down. The air comes out of the trade as they sell their final shares and the whole thing collapses while the new trader who just got in can't believe that every single time he/she buys something it does the opposite thing!
However, in the case of the DEC market, it's not that liquid. This whole mountain of red is probably only about $40k worth of inventory and most of the traders in here aren't even traders but people buying and selling assets for a game. No one needs huge liquidity to get in or out so these are more likely to play out the way people intuitively think they will. So when you post a sell order for 2.1 million dec and people see this chart, it makes them want to sell and pushes prices down more.
And this is DEC market manipulation 101.