Cryptocurrency exchanges allow you to exchange Bitcoins for fiat and other cryptocurrencies at the market rate. However, not all users will find such an exchange convenient and fast, especially if they are not users of crypto exchanges. In this article, we will talk about how you can buy and sell Bitcoin if you do not use crypto exchanges, as well as the pros and cons of each exchange method.

Disadvantages of crypto exchanges

It is easy to register on crypto exchanges, but the exchange process itself may seem confusing for inexperienced users. To get Bitcoin, users have to:

1. Top up your deposit with fiat or altcoins. If you want to buy cryptocurrency for dollars or other currency, you will first need to pass identity verification. Verification can take anywhere from one hour to several days.

2. Exchange currency for Bitcoin. Not every newbie will be able to quickly understand how orders work on the exchanges. Limit orders are often used by default. The user will click “Buy”, but the purchase itself will not happen, because the order has been placed, but has not yet been executed.

3. Withdraw cryptocurrency to your wallet. First, you have to pay a fee. Depending on the exchange, the withdrawal fee may vary from 0.0005 BTC to 0.002 BTC. The fee is fixed, and it doesn’t matter what amount you withdraw. Secondly, after sending a withdrawal request, you need to wait twice: first until the exchange confirms the request, and then until the miners confirm the transaction in the blockchain. On some crypto exchanges, requests are approved in a few minutes, but on some it may take several hours.

These inconveniences almost negate the benefits of exchanging cryptocurrencies at the market rate. But this is not the only drawback of crypto exchanges. It is not safe to exchange or store cryptocurrency on an exchange. The bottom line is that you do not own the private keys to the exchange wallet, which means that the funds do not belong to you. In addition, the exchange can be hacked, and the funds withdrawal can be blocked. This is perfectly illustrated by the situation with the OKEx crypto exchange: when one of the signatures owners was arrested, users could not withdraw funds. To unlock wallets, you need several private keys, one of which was owned by the arrested director of the platform.

But the main drawback of crypto exchanges lies in this: in order to buy and sell Bitcoin for fiat currencies, users need to go through the KYC procedure, as a result of which privacy may be at risk. What are the ways to buy and sell Bitcoin, other than cryptocurrency exchanges?

Direct purchase from an individual without intermediaries

When buying cryptocurrency from another holder, you do not pay fees to platforms, and you can set the price yourself. If the counterparty agrees, you will also benefit from such an exchange. But you need to be careful: buy cryptocurrency only from those sellers that you trust. Don’t contact sellers you don’t know anything about. Especially if you are offerred to buy Bitcoin for a very low price – it may be a trick of scammers who will try to deceive you or simply embezzle your money.

Pros:

• You may buy cryptocurrency cheaper than on exchanges;
• You don’t need to pay fees to intermediaries;

Cons

This method has a lot of disadvantages:

• Inconvenience. You need to set up a personal meeting, get to the meeting point, and return home.
• A lot of time is spent on the trip and, possibly, waiting for the counterparty.
• Uncertainty. Something might go wrong. For example, the counterparty may want to change the terms of the transaction or even turn out to be a fraudster.
• Additional expenses are possible: for travel, cafes and others.
• The search duration. It may take a long time to find a counterparty in your region. Finally, there is a chance that you won’t find it.

As you can see, physical exchange has a lot of disadvantages, so it is better to find other ways, especially if you are unfamiliar with the counterparty.

Exchangers

Online exchanges are probably the fastest and most convenient way to buy or sell Bitcoin. Requests are processed quickly, and funds are immediately credited to your wallet or account. You do not need to pay additional withdrawal fees, as when exchanging on crypto exchanges. It is not difficult to find exchangers on the Internet, but study them carefully  before buying cryptocurrency. Read user reviews to find out how reliable the service is and how quickly it processes customer requests.

Do the same if you want to sell Bitcoin. Please note how many network confirmations are required to complete the exchange request. Some exchanges speed up the process by requiring only 3 transaction confirmations. This is enough for the transaction to finalize and it cannot be canceled.

HiRiBi is one of such exchanges. Using this service, you can sell Bitcoin for PayPal USD, and the money will be sent to your wallet immediately after 3 network confirmations. But this is not the only advantage of the service. HiRiBi offers purchases at the highest exchange rate among exchangers – higher than the average market rate on crypto exchanges. So you can sell your Bitcoins and still make a profit.

For example, the Bitcoin market rate at the time of writing is $15,558, but on HiRiBi you can sell it for $2,664 more expensive – at a price of $18,206 per BTC. This is achieved thanks to the “Rate fluctuation protection” option. In addition, requests are processed automatically – no need to wait for confirmation from the platform’s manager. The service has proven to be reliable in its operation. This is evidenced by positive user reviews.

Pros: 

• Fast and easy exchange. Requests are usually processed within a few minutes. 
• Security. Funds are immediately credited to your wallet, and are not stored on exchanges.
• Ease of use. It is enough to pass an easy registration, fill out the exchange form and transfer funds to the specified banking details.

Cons

• The rate is higher than the market average rate. But this is not always the case. On the HiRiBi website, you can sell Bitcoin and make a profit, even if you bought BTC at an inflated rate through exchangers.
• Exchangers are harder to find because they are not as actively advertised as exchanges.

Exchange via messengers or social networks

You can find the services of guarantors that charge a small fee per transaction. But you agree on the price yourself, so you can buy and sell Bitcoins so profitably. But it is necessary that the guarantor has an almost impeccable reputation, and you must be sure that he will not deceive you. The exchange itself happens like this:

• The BTC buyer sends the currency to the guarantor’s account.
• The guarantor confirms that the funds have been received and instructs the seller to transfer Bitcoins.
• The buyer confirms that the bitcoins have been transferred to the wallet, and the guarantor transfers the currency to the seller’s account, minus the fee.

Pros:

• The ability to buy Bitcoin at a bargain price with a small fee.
• Quick and easy exchange without registration and other delays.

Cons

• There is a considerable chance to stumble upon scammers and be deceived.
• Finding reliable intermediaries is not easy. Most of these transactions are conducted through P2P exchanges. This is less profitable, but much safer.

Conclusion

You can exchange Bitcoins bypassing crypto exchanges, but every method has its own advantages and disadvantages: with a direct exchange, you risk running into scammers, and exchangers offer an inflated rate. But if you are looking for an easy, fast and secure way to buy or sell Bitcoin, then online exchangers are the best choice.

In December, Bitcoin’s price reached a new ATH at around $ 19,800, but could not stay at this level for a long time, and rolled back to $18,000. For some time, the price of the main cryptocurrency dropped even below $ 18,000. Many investors were sure that after breaking the previous all-time high the price will continue to rise and break new records. But that didn’t happen. Let’s find out why this happened. Is it too late to buy bitcoin now?

Why investors expected growth

In 2017, after the price of the original cryptocurrency broke through another ATH at the level of $ 5,000, this phenomenon provoked a FOMO effect in the crypto market, and the price increased almost 4 times within two months to $ 19,400. But after that, a strong pullback happened, and the price fell below $ 10,000 in less than 2 months. Over the next three years, Bitcoin could not even get close to the 2017 high.

Now analysts have noted that the situation with Bitcoin is repeating itself. This means that after overcoming the last ATH, a new, possibly stronger FOMO effect may arise, as a result of which Bitcoin will go “to-the-moon” to conquer new peaks. 

But contrary to the expectations of analysts and investors, this did not happen. Here are some reasons why Bitcoin pulled back and stagnated instead of starting a real bull rally.

Regular Correction

Look again at the chart above. What do you see? Although Bitcoin reached an incredible ATH, the chart shows that corrections have occurred along the way, and quite strong ones. This can be seen by analyzing the shadows of the candles (long lines on top of the rectangles). They indicate pullbacks. For example, when Bitcoin first crossed the $ 19,000 mark, the price plummeted below $ 16,000, but then the price rallied again and rose even above the previous high.

This is how the market works: the price cannot only rise or only fall. It all depends on the balance of supply and demand. When the price rises strongly, it means that many buyers have accumulated who want to get profits, and they start selling the asset. If at this time the number of new purchases is not less than or exceeds the number of sold assets, the price will remain or grow. If the assets of new buyers are not enough, the price will begin to fall.

FUD

Do not forget about the FUD effect: a fall in an asset can trigger a stronger fall. Those who invested in bitcoin at the peak of its value begin to panic, fearing a repeat of the situation in 2017, selling the cryptocurrency at a loss. In fact, even a small drop is enough to cause such an effect. The figure below illustrates this perfectly.

As you can see in the screenshot, a small fall is followed by a series of red candles. In six hours, the bitcoin rate fell by more than $ 600.

Short players have entered the game

Not only investors who are in for long-term profits trade in the market. Speculators seeking quick deals are out there too. They monitor the market situation and get into deals based on the likelihood of a positive event for them. As bitcoin surged above $ 18,000, futures funding rates at major exchanges like Binance turned negative. 

This means that the number of open short trades to sell bitcoin has exceeded the number of long positions. In other words, the preponderance of forces was on the side of the bears. The phenomenon of negative futures financing rates is extremely rare in the crypto market and signals aggressive behavior of sellers.

However, the opposite effect may also occur if there are enough buyers. Then the positions of the shortists can be liquidated (the price continues to grow rapidly, as sellers’ deals are closed with losses). 

And now we smoothly move on to such a phenomenon as a confrontation between longists and shortists on the crypto market.

Battles of whales 

Movements of whales (major players) in the crypto market can provoke a whole trend, not to mention local rate fluctuations. This type confrontation has been going on since the very appearance of stock trading.

When long positions accumulate, it is profitable for shortists to liquidate them, since after that there will be little to hold back the decline in the exchange rate if the strength of buyers has practically dried up. In the cryptocurrency market, such situations often arise. They can be seen on the charts of Bitcoin and other cryptocurrencies. Here is one example:

Shortists “knock out” positions of longists.drops

On the five-minute chart, you can see that the price of cryptocurrency sharply dropped after many positions with high leverage were  opened. If a trader opened a long position with a leverage of x100, the price only needs to drop by a few percent, depending on the amount of the collateral, for  the position to be liquidated (the player’s collateral is completely gone).

However, the Longists can also carry out a counterattack to eliminate the positions of the shortists. This can also be seen on the graph. But in this battle, the bears still won. 

How to protect yourself against a fall

Corrections are an integral part of the market because of their cyclical nature. But there are tools that allow you to insure your funds and control risks when investing in bitcoin. This can be achieved in several ways:

• Hedging;
• Diversification;
• Stop-Losses;
• Alternative instruments (inter-exchange arbitrage).

Hedging

The method works like so: a trader opens a position equal in amount but opposite in direction. For example, if you hold Bitcoin and are suspecting that the trend will change to a down-heading one and the price will fall, you can open a short position for the same amount. In this case, the loss on one of the transactions is offset by the profit on the other. Professional investors and hedge funds resort to hedging, which insures their assets if an uncertain situation arises in the market (that is, it is not clear in which direction the asset will move).

Diversification

Let us quote the law of conservation of energy and project it into the sphere of the financial world: money does not come from nowhere and does not disappear, but only flows from one market to another. This means that if some financial instruments become cheaper, others grow in value. Using this rule, you can distribute your assets between different types of instruments: cryptocurrencies, oil, gold, stocks and currencies. Of course, diversification does not always mean avoiding losses, but it will minimize them.

Stop Losses

If you are sensing a correction, you can transfer bitcoin to a crypto exchange so that you can quickly sell the cryptocurrency in the event of a rollback. In addition, you can place a pending sell stop order on the exchange. Thus, you determine the acceptable level of losses in advance .

For example, you believe that if Bitcoin falls below $ 18,000, then it will continue to fall. In this case, the trader sets a condition: if the price reaches $ 17,900, then place a sell order at $ 17,850. If the rate, as expected, drops below, you will experience a loss, and then you can re-enter the market at a lower price.

Alternative Tools

We have listed the main tools, but if you search for more, you will find alternative ways to minimize risks and losses. 

One of these methods is the service HiRiBi. With the help of an exchanger, you can always sell bitcoin at a rate higher than the market average. This is achieved thanks to algorithms designed for protection against volatility of cryptocurrencies and providing access to international platforms, where the bitcoin rate can differ significantly. This allows HiRiBi users to offer the highest rate for selling bitcoin. For example, now with a bitcoin price of $ 19,290 you can exchange it for USD PayPal at the rate of $ 22,377 and get an additional $ 3,086 for 1 BTC.

How that works:

1. Enter the amount of BTC or USD you want to sell Bitcoin for.
2. Enter your PayPal account.
3. Send coins and wait for the money to arrive in your PayPal account.

Funds will be sent automatically after 3 confirmations on the Bitcoin network. HiRiBi allows you to sell bitcoin at a higher price, even if the price has already rolled back. This way you will reduce losses or even get a small profit. You can also immediately sell bitcoin and then buy it cheaper on the crypto exchange in order to immediately get the profit and go to zero, even if the rate falls. 

So what are you waiting for? Follow the white rabbit HiRiBi.

The 24/7 crypto market provides a lot of opportunities to make a profit due to the high volatility of digital assets. This is much more profitable than Bank deposits or investments in other assets, such as gold or oil. In just a month, cryptocurrencies can generate more returns than any traditional assets. However, the risks are increased accordingly. We will tell you how to sell bitcoin to make money and not wait for several years until the investment capital grows. 

Shorts

Short positions are opened in order to profit not from the growth of the cryptocurrency price, but from its fall. If you missed the price increase, do not worry – there is always an opportunity to open a short position and make a profit if the cryptocurrency becomes cheaper.

However, you must remember that you are using borrowed funds, which increases the risk of losing money. If the cryptocurrency does not fall in price and its rate increases significantly, there is a risk of a margin call. This is an event that requires additional collateral to prevent the position from being liquidated. If you are unable to make an additional deposit, your transaction will be canceled and the deposit amount will be fully debited from your account.

This is called margin trading, in which the margin is your collateral amount of bitcoins. Margin trading is supported by many crypto exchanges, including:

• Binance;
• OKEx;
• BitMEX;
• ByBit and others.

The only way to reduce the risk if you use leverage is to use a small part of the deposit. When opening an order, the exchange usually displays the liquidation price at which your position would be canceled. The smaller the deposit amount you use, the further the liquidation level will be from the current price and, accordingly, the lower is the risk.

Arbitrage

Aggregators and quote providers use the average value of rates. On various crypto exchanges, the Bitcoin exchange rate may differ by 10% or more. This opens up arbitrage opportunities. There are services that allow you to automate this process via the API using bots. Bots buy cryptocurrency on one exchange, transfer it to another and sell it there. For each exchange, the service makes a profit 

There are other approaches. For example, the HiRiBi service (https://hiribi.com/) also uses the “Rate Fluctuation Protection” function. The exchanger protects users from fluctuations in the bitcoin exchange rate, thereby providing the highest selling price. It doesn’t matter whether the exchange rate rises or falls – in any case, the user sells cryptocurrency at a higher rate than the average market rate.

For example, you send 1 BTC at a price of $10,000, and the next day the Bitcoin exchange rate rises to $12,000. In this case, you will get $12,000 instead of $10,000. And if the price falls, you will get the amount that was at the time of creating the exchange request. Another important advantage of HiRiBi is that it is possible to make a profit immediately. You don’t need to wait for the exchange rate to rise and fear that it will fall and you will lose some of your profits or suffer losses.

The HiRiBi service (https://hiribi.com/) allows you to exchange Bitcoin to PayPal USD in 4 simple steps. Funds will be sent to your PayPal wallet immediately after 3 network confirmations.

Using trading tools

Crypto exchanges provide tools that allow you to sell Bitcoin higher and reduce the risks in the event of a price collapse. One of such tools is stop loss. With the help of a stop loss, Bitcoin traders set the acceptable level of losses. For example, if you set a stop loss at 5% below the purchase price, then if the Bitcoin exchange rate falls, you will lose exactly that much. Even if the price of BTC drops by 15%, you will only lose 5% of the transaction amount.

But how can I use this tool to increase my income? There is such a tool as a trailing stop. It works as follows: if the price of the cryptocurrency increases, the stop loss moves up to the specified step level. Let’s say you bought bitcoin at $10,000 and set a trailing stop in 2% increments. As soon as the cryptocurrency exchange rate increases by 2%, the stop loss will automatically move to the break-even point. And if the rate rises by another 2%, the stop loss will be 2% higher than the purchase price ensuring a guaranteed profit that you will get even if the rate rolls back. The stop loss will move as long as the price rises and does not touch it.

Futures

Another way to earn more on sales of bitcoin. Futures are contracts that oblige at a certain point in the future to deliver an asset or buy it back at the price specified by the seller. Futures contracts are a popular tool among crypto traders and investors for hedging market risks.

Here’s how it works: you open a deal to sell Bitcoin at $12,000. Even if at the time of expiration of the contract, Bitcoin price will be lower, for example, $10,000, the buyer (exchange) will be obliged to buy the goods at this price. However, if Bitcoin will be $20,000 at this point, you will still have to sell Bitcoin for $12,000. 

Like margin trading, futures allow you to buy and sell assets for a larger amount than the trader has at the time of the transaction. However, unlike margin trading, when entering into a futures contract, traders do not use leverage and do not provide cryptocurrency as collateral. But at the time of the transaction, they have to pay 10% of the order value. At the same time, the trader does not borrow money from a broker or other players, so there are no restrictions on transactions: a margin call will not occur, and the position will not be liquidated.

Delayed arbitrage 

This method is similar to crypto arbitrage but has some key differences. This method is perfect if the cryptocurrency exchange rate has fallen sharply. At such times, there is strong volatility in the crypto market, and the rates on different exchanges may differ significantly. So, after the collapse, find the crypto exchange with the lowest Bitcoin price. This can be done using CryptoCompare (https://www.cryptocompare.com/coins/btc/markets/USDT) or CoinMarketCap (https://coinmarketcap.com/currencies/bitcoin/markets/) services.

Buy cryptocurrency on this platform and hold it until the exchange rate recovers or increases. You can send coins to your wallet to store them safely. As soon as the exchange rate recovers or volatility decreases, find the exchange with the highest rate, send Bitcoin to it, and sell the coins. You just need to check the fee, so that it does not absorb most of the income.

And if the exchange rate has not recovered and you are tired of waiting, you can sell cryptocurrency on the HiRiBi service at any time (https://hiribi.com/) at the highest price. Even if the BTC rate fell even lower after the purchase, you can sell Bitcoin without losses. But only if the drop was no more than 10%. In any case, you can use HiRiBi to compensate for at least some of the losses in the event of an unfavorable outcome.

Conclusions

We’ve covered five ways to sell Bitcoin to earn dollars or another currency. These methods are available to users with any experience of using cryptocurrencies, but some of them, such as margin trading or futures, involve high risks of losing funds. Keep it in mind when choosing a suitable way to sell Bitcoin with a profit.

How to hedge risks when investing in Bitcoin

Investments in cryptocurrencies are associated with high risks and can lead to losses and even to the complete loss of all funds. In such situations, every Bitcoin investor should have tools in stock to minimize the risks. In this article, we will talk about such tools that investors can use to hedge risks.

What is hedging?

Hedging is the opening of transactions that are equal in amount and opposite in direction in order to compensate for market risks. Investors and traders use this method if they need to insure their assets against a fall, for example, during periods of flat and uncertainty in the market.

Hedging is one of the main risk management strategies used by professional traders, investors, and hedge funds.

How it works

The mechanics of hedging is simple. Let’s explain it with an example: an investor buys 1 BTC for $12,000. There is no clear upward trend in the crypto market, and the cryptocurrency exchange rate is consolidating, so the investor is not sure that the price will continue to grow. Then it opens the opposite position, using derivative financial instruments, such as futures, perpetual contracts, or margin trading with leverage. So, the investor opens a short position to sell 1 BTC at the price of $12,000. Then, if Bitcoin falls to $10,000, the first position will result in a loss of $2,000. But this loss will be offset by $2,000 profit from the second transaction. As a result, the trader will lose only a small amount on trading fees, but will retain the main part of the investment.

Next, there are two action scenarios:

1. Lock in the second position, getting $2,000 profit and continue to hold the first position in anticipation of further growth. At the same time, if the price goes even lower, the investor loses funds.
2. Leave the second position and close it only in the case that the price will bounce and form an upward trend.
3. Close the second position with a profit and open a new short position but at the price of $10,000. However, for hedging, the amount will be the same in Bitcoin: 1 BTC, but in dollar terms it will be less than the initial position.

But this is not the only way to hedge risks when investing in Bitcoin. In addition, not all Bitcoin investors use crypto exchanges. Many people prefer to safely store cryptocurrency in a wallet. They also have ways to hedge risks.

How to hedge Bitcoin if you don’t trade on crypto exchanges

The aforementioned methods are suitable for users of cryptocurrency exchanges, but if you want to buy Bitcoin through exchanges and are going to store cryptocurrency in your wallet, these methods will not work for you. But there is one great way that will help not only reduce losses, but also fix additional profits if the price of cryptocurrency increases.

Note. To hedge risks in this way, you need to use 50% to buy Bitcoin, and leave 50% in dollars, so that you can provide a safety cushion in case of the exchange rate  collapse.

For this method, we will use the HiRiBi exchanger. The service allows you to sell the Bitcoin cryptocurrency at a price higher than the average market rate. The idea is that the exchange rate of cryptocurrencies may differ by 10% or even more on different crypto exchanges. But not all small investors have access to such platforms. But some companies, such as HiRiBi, can trade on them, which allows them to buy cryptocurrency from users at a higher rate than on crypto exchanges.

For HiRiBi, the benefit is that they do not need to transfer cryptocurrency from another platform in order to sell it high on one of the exchanges. When buying BTC, users immediately transfer cryptocurrency to the HiRiBi wallet and receive USD to their PayPal wallet. Funds are sent immediately after 3 confirmations of the Bitcoin network. Let’s look at several options and calculate how much profit you can make when hedging risks in these ways.

Option #1

You buy 0.2 BTC at the price of $12,000. You leave 0.1 BTC stored in the wallet, and fix immediately another 0,1 BTC using the HiRiBi exchanger. This way you will have a margin of profit in the event of the BTC exchange rate collapse and room to maneuver so that you can fix a profit or at least go to breakeven.

Then you immediately sell 0.1 BTC on the HiRiBi website. The exchange rate may vary depending on the price on crypto exchanges and exceed the exchange rate by an average of 5% – 10%. For example, now with the Bitcoin market rate of $12,000, the rate at HiRiBi is $13,282, but for convenience of calculations, we will round the rate down to $13,200.

So, you sold 0.1 BTC for $1,320 and $120 is your income. Now, even if the bitcoin exchange rate drops to $10,800, you can break even. But that’s not all. Let’s say that the Bitcoin rate really dropped to $10,800. Then you will again be able to sell the remaining 0.1 BTC via HiRiBi at a rate of approximately $11,800. Then you will lose only $20 in the first position, but in the end, you will still get a profit of $100.

Total

Invested: $2,400

Profit: $120 – $20 = $100

Conclusions: even taking into account the fall in the price of BTC, this method allowed not only to reduce losses, but also to get a profit as a result. You can also use other proportions, for example, leave 30% of the amount in Bitcoins, and sell 70% immediately through HiRiBi. Then possible losses will be reduced even more.

Option #2

You buy 0.1 BTC at the rate of $12,000 for 50% of the available amount, and leave another 50% in case the bitcoin price falls. Let’s say the price of BTC drops to $10,000. Your loss will be $1,200 – $1,000 = $200.

Then you buy 0.12 BTC for the remaining $1,200 (you can do more if you want to break even or make a profit) and sell coins on HiRiBi at a rate of approximately $11,000. Then you will get $1,320 in the end and your income on the second transaction will be $120. But if you buy 40% more bitcoin and sell it on HiRiBi, you will break even. And if you get even more, you will make a profit.

Total

Invested: 2.400

Profit: $120 – $200 = -$80

Please note that you also need to take fees into account. P2P exchangers are great for buying, because the exchange rate is closer to the market rate, and the fee for withdrawing funds from the account is approximately equal to the fee of the Bitcoin network.

Conclusions: instead of $200, your loss was reduced to just $80. However, the first option is more profitable to use, since you immediately fix the loss and can prepare for a fall in the exchange rate. But you can also increase the size of the position – then you will not only be able to compensate for losses, but also make a profit.

Conclusion

You can hedge risks in different ways, depending on how you invest in Bitcoin: buy on cryptocurrency exchanges or through exchangers, and then store it in your wallet. Each method has its advantages and disadvantages. It is not safe to store funds on crypto exchanges: it can be hacked, and cryptocurrency can be stolen. however, there are higher fees on exchangers, but they can be reduced if you sell Bitcoins for PayPal USD on HiRiBi, as well as reduce losses in the event of the exchange rate collapse.

Whales have made their fortune because they are well versed in the market psychology and know how certain players behave. This allows them to think through their strategy several steps ahead. Most traders are reactive – that is, they follow the market blindly. Whales know this, and they use this knowledge.

Moreover, whales have enough capital to set the trends of the crypto market themselves, manipulating prices of cryptocurrencies. It is enough to give traders a small “lure”, and then fear and greed will do their job, enriching the big players. In this article, we will tell you what methods whales use to manipulate the crypto market and how not to fall for their tricks.

Pump & Dump

You may have seen this picture at least once in the crypto market, when a certain cryptocurrency exchange rate first increases rapidly, and then, after a while, sharply collapses. Sounds familiar? This is the Pump & Dump scheme. This is probably the most common scheme that whales use to manipulate the price of cryptocurrencies.

The crypto market is much younger than the stock and currency markets and much less liquid. If you sell $1 billion worth of fiat currency, its price will not change much, and if you sell major shares for the same amount – the price will fall slightly. But if you sell Bitcoin for the same amount, and even more so other cryptocurrencies on exchanges, the rate can instantly fall by tens of percent. This is due to the small capitalization of digital assets – it is hundreds of times smaller compared to the stock market alone.

How does the Pump & Dump scheme work? In order to protect your assets, you need to understand how the mechanism of this method works. It is quite trivial and is implemented in a few simple steps:

1. First, whales buy up an asset and its price starts to grow. As a rule, a group of traders acts and coordinates all their actions with each other. Each group can implement this scheme in its own way: some sharply raise the rate, others do it gradually, which further increases the effect and reduces risks.

2. A network effect kicks in: users see the cryptocurrency exchange rate growing and think about buying, mistakenly believing that this is a signal for growth. Some buy immediately, while others continue to wait and buy when the price has almost reached a local peak. These traders are called “hamsters” in the community – they greedily gain assets, as hamsters fill their mouths with food.

3. As soon as the hype fades away and the price is close to the stagnation or flat phase, the whales begin to close their positions. And those who bought the last, are the biggest losers. Whales almost always make a lot of money, because they bought assets at the very start, provoking their growth.

Such schemes whales use quite often. Watch the Bitcoin or Ethereum chart and you will see how often mountain-like figures appear on the chart, illustrating a sharp increase and a strong pullback.

Market reversal

Whales can turn the market around at any time without fundamental reasons. They watch the positions of other traders and wait for the best moment to turn the trend in the other direction.

The thing is that when the price falls or grows, at a certain moment there is a significant disproportion towards sellers or buyers. For example, when the price falls for a long time, many traders open short positions, that is, to sell cryptocurrencies.

And then it becomes profitable for whales to “knock out” these positions, leaving shortists with losses. After their positions have been closed at a loss, nothing stops whales from turning the price around and starting a new uptrend. Sellers have nothing else to sell, and those who opened short positions earlier start closing them, fixing profits, thereby increasing growth.

But this does not mean that the whales will always be successful. Sometimes strong fundamental factors ruin the plans of large manipulators. And then they lose, and they have no choice but to postpone their plan for another, more appropriate moment.

How not to fall for manipulations

So we found out what methods are used by whales to manipulate the market. The question remains: how do traders act to avoid being hit? There are some simple but effective tips that will help beginners to insure themselves against such situations on the crypto market.

Tip #1. Watch the fundamentals

If the rates of cryptocurrencies grow organically, then this will be indicated by fundamental factors:

• Growing number of Bitcoin and other cryptocurrencies users;
• Increasing number of crypto payments;
• Expansion of platforms that support exchange and payments in cryptocurrencies;
• And so on.

If the exchange rate is growing, but there is no apparent reason for this, then it is possible that whales have entered the game and they want to attract unwary traders to buy more cryptocurrency.

Tip #2. Use a small amount

If you are still afraid to miss out on possible profits from such growth, then follow the principles of risk management and invest only a small part of your money. This way you will be able to increase your capital, but the risks will remain low in the case of a negative scenario.

Tip #3. Use stops

The best way to protect yourself from a correction is to set a stop loss just below the purchase price. This way you determine how much you can afford to lose. And if the cryptocurrency grows a little, then the stop can be moved higher – to the break-even level. In this case, you will not suffer losses if everything goes wrong.

There is also a trailing stop. Stop orders automatically move higher as long as the price rises. Using a trailing stop, you can not only break even, but also get at least a small profit.

Just don’t forget that there are always some risks.

What to do if you succumbed to tricks of whales anyway

If you bought high, and the cryptocurrency exchange rate collapsed, then do not despair. Local fluctuations in the exchange rate are not so significant if you are focused on the long term.

Option #1. Don’t panic

Just keep holding as before. It may take longer before the price recovers, but if you plan to invest in the long term, it doesn’t really matter. And during corrections in the crypto market, you can get cryptocurrency to your portfolio at a lower rate.

Consistency and patience are crucial here. Sometimes it seems as if the exchange rate will not grow, and at such moments you really want to sell cryptocurrency. Don’t rush. It often happens that investors fix losses, and after a little time, the price suddenly starts to rise. 

Option #2. Use alternative tools

The market is unpredictable, but there are always alternatives that will help you compensate for some of your losses or increase your profits, depending on the situation. One of such tools is arbitration. Cryptocurrencies are volatile, and because of this, often the rates on different platforms differ. So you can always find a platform where you can sell Bitcoin or altcoins at a higher rate.

But the search for sites takes a lot of time, and while you are transferring cryptocurrency from one exchange to another, the exchange rate may change. In addition, this approach will be difficult for beginners. But some exchanges have found a solution – they offer users to sell Bitcoin at a price higher than the average market rate.

One of such services is HiRiBi. The exchange rate may exceed the market price by 10% or more. HiRiBi supports the exchange of BTC for PayPal USD. In addition, the service uses the Bitcoin Fluctuation Rate mechanism, which allows you to sell bitcoin at the previous higher rate, even if the price dropped. HiRiBi also has a profitable affiliate program that allows you to get 2% of every Bitcoin for PayPal exchange of an invited user.

Conclusion

Now you know how whales manipulate the crypto market and how to protect yourself from this. Do not give in to emotions, but follow the rules of risk management – this will help reduce risks, even if you buy Bitcoin at an inflated rate. But if you learn how to detect the manipulation of whales, you can predict their behavior and understand when to open and close positions.