Uncovering the manipulation techniques of the crypto market makers: Washing, selling and self-help guide for retail investors

The "Cat and Mouse Game" in the Crypto World

In the Altcoin market, the game between retail investors and whales has never stopped. At the beginning of 2025, a retail investor named Xiao Li lamented on social media: "The Altcoin I bought just went up 30%, and before I could even be happy about it, it plummeted 50%, and I found out in the end that it was the whales manipulating the market." Similar stories are commonplace in the crypto world. Whales use precise operations to manipulate prices, and retail investors often become the "harvested" targets. So, how do whales manipulate the market? And how should retail investors respond? This article will take you deep into the analysis of the three major manipulation tactics of whales - wash trading, volatility, and distribution, and provide practical self-rescue strategies.

Part 1: Dissecting the Manipulation Tactics of Whales

1. Wash Trading: The "Psychological Warfare" of Cleaning Up Floating Shares

The core goal of whales' wash trading is not to directly seize the tokens of retail investors, but to create panic and uncertainty, forcing the weak-willed holders to actively give up their positions. Wash trading usually has the following tricks:

• "Grinding": The time tug-of-war. Whales keep the coin price in a narrow range, repeatedly trading sideways, neither rising nor falling. Retail investors stare at the screen, and their patience gradually runs out, eventually choosing to cut their losses and exit. For example, a certain Altcoin was trading sideways around $0.1 for a month, and retail investors thought "it's hopeless," and sold out, while the whales quietly accumulated.
• "Trapping": Creating panic-driven plunges. Whales use large orders to dump the price, causing it to plummet 10%-20% or more in a short period of time. The price drop is often accompanied by "bearish rumors" on Telegram groups or X platforms, such as "the project team has run away" or "there is a code vulnerability." Retail investors sell out of fear, while whales buy at the low levels. For example, a certain DeFi token plummeted from $0.5 to $0.3 in a single day in 2024, and then quickly rebounded, and retail investors found they had been "washed."
• Purpose: Optimizing costs and reducing resistance. Through wash trading, whales can accumulate positions at lower prices, while also flushing out short-term speculators, reducing selling pressure for subsequent price increases. Data shows that the average cost of whales' positions can be reduced by 15%-20% after wash trading.

1. Volatility: The "Sleight of Hand" of Creating Illusions

Volatility is another major tool for whales to manipulate market sentiment. Through repeated price fluctuations, whales confuse retail investors, making it difficult to tell whether it's wash trading or distribution.

• Fake Rallies: Whales briefly raise the price (e.g., from $0.05 to $0.08), attracting retail investors to chase the rally, and then quickly suppress it back to the original level. This "fake breakout" makes retail investors mistakenly believe that a bull market has arrived, only to end up being trapped.
• Fake Volume: By "countertrading" (buying and selling from themselves), whales create false trading volume to attract market attention. In October 2024, the US SEC exposed a certain trading platform where market makers used wash trading to fabricate billions of dollars in trading volume.
• Purpose: Testing market reactions. Volatility not only can flush out floating shares, but also allows whales to observe the holding intentions and capital flows of retail investors, providing data support for their next move.

1. Distribution: The "Ultimate Endgame" of Cashing Out at High Prices

When whales have accumulated enough positions and completed the wash trading, they will enter the price increase and distribution stage.

• Pump Tactics: Whales collaborate with positive news (such as "about to be listed on a major exchange" or "institutions are entering") to drive up the price. For example, a certain NFT token was pumped from $0.02 to $0.1, and retail investors' FOMO sentiment soared, rushing in.
• Stealthy Distribution: Whales won't sell all at once, but in batches at high prices, while using small buy orders to maintain the appearance of price stability. By the time retail investors realize the downtrend, the whales have already exited.
• Purpose: Maximizing profits. For example, a certain MEME token, the whales accumulated at $0.01 and distributed at $0.06, gaining a 500% profit, while the retail investors who chased the rally faced a 70% paper loss.

Part 2: Will Whales Keep Manipulating the Market?

1. Constraints of Time and Cost

Whales are not invincible; their operations are constrained by both capital and time. Controlling the market requires a large amount of capital, especially leveraged capital, and the interest cost is high. For example, if whales borrow $100 million to manipulate the market, the monthly interest may be as high as several million dollars. Therefore, wash trading or volatility will not last indefinitely, usually ending within 1-3 months.

1. The Attitude of Retail Investors Determines the Pace

If retail investors generally "hold and don't sell," whales may face two choices:

• Increase the Intensity: Through more drastic price dumps (e.g., over 30% drops) or more sensational rumors (such as "the project is bankrupt"), forcibly wash out the positions.
• Accelerate the Pump: If they have already collected 60%-70% of the circulating supply, whales may directly raise the price, utilizing retail investors' chasing mentality to complete the distribution.

1. Influence of External Factors

Regulatory intervention or systemic market risks (such as a major Bitcoin crash) may also disrupt the whales' plans. After the implementation of the EU's MiCA regulations in 2024, some highly manipulated small Altcoins were forced to suspend their market control due to compliance pressure.

Part 3: How Can Retail Investors See Through and Respond?

1. Signals to Identify the Whales' Intentions

• Divergence between Trading Volume and Price: During wash trading, the price drops but the trading volume does not increase significantly, indicating that the whales are deliberately suppressing the price, rather than true selling; during distribution, the price rises with large volume, which may be the whales clearing their positions.
• Technical Indicators: RSI below 30 with a bottom divergence, or MACD golden cross followed by a rapid death cross, are often signals that wash trading is ending.
• News Anomalies: Sudden "bearish" or "bullish" news that is not officially confirmed is often a smokescreen for the whales to manipulate sentiment.

1. Three Major Strategies for Retail Investors

• Hold Low-Cost Positions: If your holding cost is lower than the whales' accumulation range (which can be determined by the coin's distribution chart), you don't need to panic and sell. The whales' target is the floating shares, not the determined long-term holders.
• Utilize Volatility to Buy Low and Sell High: Buy the dips at the wash trading lows (such as the 20-day moving average support), and sell at the pump highs (such as after breaking the previous high and then retracing), using swing trading to dance with the whales. For example, Xiao Li bought in at $0.03 and sold at $0.07, earning a 133% profit.
• Diversify Risk, Avoid Highly Manipulated Altcoins: Don't put all your money into a single small Altcoin, especially those with low trading volume and small circulating supply. Choose top coins like BTC and ETH, which can effectively reduce the risk of being manipulated by whales.

From "Cannon Fodder" to "Hunter"

The essence of the crypto world is a battle of information and psychology. Whales try to turn retail investors into "cannon fodder" through wash trading, volatility, and distribution, but as long as you grasp their operational logic, retail investors can also turn passive into active. When faced with the next crash or sideways trading, don't rush to cut your losses or chase the rally, calmly analyze the market signals, and you may find that the whales' "tricks" are not that hard to break. I hope this article can light a lamp for you, helping you find your own way to survive in the jungle of the crypto world.