The Wolf Den #516 - The Truth About Buy And Sell Walls

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With every major Bitcoin move, there is increasing chatter around the importance of massive buy and sell walls on exchanges. If you are not familiar with the terms, these are huge orders sitting in the order book.

Nobody is doubting the significance of psychological levels like 20K, 50K, or 100K, where traders congest the order book with bids and asks, That said, a lot of the information we hear about buy and sell walls is incorrect.

Most think of sell walls as being bearish and buy walls as being bullish. They believe that a huge sell order means that price is going to go down, because a whale is looking to exit. They believe that a huge buy order is bullish because someone is looking to gain maximum exposure to the asset.

If you believe this, you are buying into the story that the whales are trying to tell you. A sell wall most often stops price so that someone can BUY. A buy wall holds it up so that they can finish SELLING.

Entering an order that you do not intend to fill in order to manipulate price action is illegal in legacy markets. Since we are trading in the wild west, it’s perfectly acceptable behavior in crypto. It is called “spoofing.”

If you truly are trying to sell a large quantity of an asset, you would never put up a huge sell order. It’s against your own interest because you are stopping price and scaring buyers. Real sellers sell in smaller chunks over time as the price is rising. Real buyers do the same, to avoid pushing price higher.

This strategy was publicly proven when Michael Saylor explained how he bought hundreds of millions worth of Bitcoin over a few days in tiny increments, so as to avoid impacting the price. Imagine if he dropped his full order onto the market. It would never fill at his desired price.

You do not need to watch order books. It’s more likely to confuse you than to help unless you are a pro and this is the core of your strategy.

Just trade the chart.

I recently shared a “Bart” pattern in jest, an inside joke in the trading community that describes when price rises and then immediately retraces the entire move.

Now we have what I call a Marge… with price retracing before it even has time to complete the Bart pattern.

As humorous as the Bart and Marge are to the community, they are clear signals that leveraged traders are being liquidated on both sides, with price being pushed up and down in what is effectively just sideways chop.

This is not a time to be trading Bitcoin, and there is nothing new to discuss on the chart that we have not already talked about. Revisit the larger time frame charts from the past few days and weeks.

Key events to watch this week:

Some of the main moves in markets:

Elon Musk fans and the crypto community are all bummed about this one. The Twitter acquisition deal has come to a halt because Elon Musk has seemingly discovered that a good portion of Twitter users are not real. Twitter claims the number is less than 5%, while Musk claims the number could be over 20%. 

A letter filed to the SEC yesterday said the following: “This is a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.”

It’s possible that Musk just wants a better price, but the bots are clearly an issue on Twitter.

The wait is finally over. The Crypto Bill will be presented today! The bill is being introduced by Republican Senator Cynthia Lummis, a Bitcoin OG who has been hodling for nearly a decade and Democrat Senator Kirsten Gillibrand.

From Coindesk:

“The effort from Lummis and Gillibrand is seen in Washington as a starting point for a dialogue that won’t lead anywhere significant before next year. It joins several previous bills that mostly sought to bite off narrow pieces of the cryptocurrency landscape, such as the recent push for stablecoin rules by Senator Pat Toomey (R-Pa.). It even borrows from some of that work.

Still, the effort would likely have to split into several pieces in 2023 as it winds through congressional committees in the next session. With Lummis on the Senate Banking Committee that oversees the Securities and Exchange Commission and Gillibrand holding a spot on the Agriculture Committee that watches the commodities and the CFTC, the lawmakers are well placed to help shepherd key portions of the legislation.”

It will likely be a long road, but we finally have actual legislation on the docket.

Here is what Senator Lummis has said about the bill.

“The bill will fully integrate digital assets into [the] financial system and bring order to the crypto space. We hope hits the sweet spot between regulation that is clear and understood and does not stifle innovation. We can’t overregulate. If we overregulate, it [Bitcoin innovation] will go to other countries. Even the regulators are waiting to see our legislation move forward.”

Here is a quick summary of what is included:

From The Block:

“The Securities and Exchange Commission (SEC) is reportedly investigating whether Binance’s BNB token was a security at the time of its sale in 2017.

Bloomberg reported Monday that the SEC has launched a probe into the BNB token. The US securities regulator is taking a look at the early days of the exchange, examining whether the sale of its BNB token during a 2017 initial coin offering amounted to an unregistered sale of securities.”

This is similar to what is happening with Ripple, so it will be interesting to see how these investigations (this is not an actual case) resolve.

Today we are joined by the CEO of Argo, Peter Wall. Peter is deeply involved in crypto asset mining and passionate about smart growth. We dive deep on how Argo is securing the power grid in Texas, plans for their future, mining competition, the energy debate, and mining hot spots.

In this episode with Peter Wall, we discussed:

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