Since last summer, the US-listed company MicroStrategy kicked off the institutional entry prelude, and institutional investors have poured into the cryptocurrency market one after another. Recently, more and more institutional investors and speculators, with the assistance of cryptocurrency exchanges, are adopting a new trading strategy to hide the true scale of transactions.
On December 31 last year, a Bitcoin (BTC) order appeared on the cryptocurrency exchange Coinbase, which attracted the attention of Avi Felman, top trader of the cryptocurrency hedge fund Blocktower Capital. He believed that there was a massive asset. Investors are buying large amounts of Bitcoin, and the actual purchase amount is hidden through order splitting.
Michale Saylor, CEO of MicroStrategy, the Nasdaq-listed company that holds the most bitcoins, used this method to buy bitcoins in large quantities.
Ferman then added, "Don't fight the WAP!"
Algorithmic trading is also called programmatic trading, which is the main profit method of large investment banks by issuing instructions in the program. Traders split the order into multiple small orders to reduce shock costs and increase profits. At the same time, it can hide the actual transaction scale, avoid the use of the transaction target and transaction volume by speculators.
The ``iceberg strategy'' of the crypto whale
David Lifchitz, Chief Investment Officer of ExoAlpha, a quantitative trading company, told Coindesk that the continuous reload strategy of crypto whales is similar to the traditional financial "iceberg order". The transaction is split into multiple small orders, and the transactions are carried out in batches, just like the iceberg you see before you. In fact, most of the area is below sea level.
Observing this transaction data researched by COINBASE by APEX: E3, you can find that there are a series of large orders appearing at the same time, but the pricing is different. This is a typical iceberg phenomenon. Such an iceberg strategy that hides the actual scale is actually welcomed by most large exchanges because limit trading through algorithms will reduce the extent to which large transactions affect market prices.
Assuming that the algorithm is to minimize information leakage, large exchanges such as Binance, Coinbase, FTX, Bitfinex, and Bitstamp all allow algorithmic trading. However, when giant whale investors use the "iceberg strategy" to hide the actual trading scale, high-frequency traders can use strategies such as "tracking huge orders" and "iceberg algorithm" to counteract it.
In this case, giant whale investors can distribute "iceberg orders" on different exchanges as randomly as possible to avoid becoming the prey of high-frequency traders.
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