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Pseudonymous cryptocurrency influencer Rekt Fencer highlighted in a viral thread on X (formerly Twitter) how market makers manipulate prices and help traders to make millions.
What Happened: Rekt Fencer shared valuable insights about the strategies employed by market makers (MMs) and how traders can potentially profit from understanding these tactics. The two types of MMs:
Rekt Fencer points out the importance of market makers:
The influencer details how market makers influence token prices using pumps, dumps or distributions, depending on their objectives.
In bull runs, they create fear of missing out (FOMO). In bear cycles, they accumulate at low prices to maintain sufficient trading volume.
Also Read: Dogecoin, Shiba Inu And Who Else? How Meme Coins Have Evolved Since The Last Bitcoin Halving
Why It Matters: Recognizing the presence of market makers is crucial for traders.
Analyzing price charts for indicators such as sharp pumps before significant news, steadily rising volume without substantial price changes and repeated patterns of pumps and dumps can help identify their activities.
However, investors should be cautious of MM tactics like pushing prices to new lows to scare off holders, only to have the price swiftly rebound.
Rekt Fencer points out to how DWFLabs, a market maker, worked for Floki (CRYPTO: FLOKI) after accumulating their position for several months during a sideways trend. Then, they pumped the token by 772% in just three weeks.
Floki is one of the most notable coins that set out to catch up in valuation to Shiba Inu (CRYPTO: SHIB), being famously volatile. Whether market makers influence the trading behavior of Shiba Inu or other major cryptocurrencies cannot be established with certainty.
The tweet concludes with the trader advising, traders to buy during the accumulation stages and sell during the distribution stages which will assist in maximizing profits.
What's Next: The influence of meme coins and Bitcoin as an institutional asset class are topics expected to be thoroughly explored at Benzinga's upcoming Future of Digital Assets event on Nov. 19.
Read Next: Crypto Trader Explains Why Middle East Billionaires Are Suddenly Interested In Launching Meme Coins
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image: Shutterstock