A bear trap is a common occurrence in the crypto space, and it usually involves a group of traders trying to manipulate the market conditions to their advantage. Usually, these traders come together and have an understanding.
They decide to sell a large number of tokens simultaneously as a way of driving down the value of the token. While they are doing this, they try to convince the community that a price correction wants to occur.
The community believes that the group of traders is correct because the token’s value is falling. Usually, out of fear, the community members decide to start selling their tokens. This makes the price of the coin fall drastically.
As the token’s value is falling, the group of traders that prompted the ripple effect agree to buy a large number of coins from the market. When they do this, they buy them at a cheaper amount compared to the previous value.
This means that they are making a profit. By buying a large number of the tokens, the value improves.
Whales understand the psychology linked to crypto trading and the market. They realize that people are prompted to sell their tokens when the market worsens than when it is rising. Once the community sees that the value of their coin is falling, they try to sell it off immediately.
Whales use the bear trap as a way of manipulating the market. They sell in huge amounts when they want the token’s value to fall and buy in huge amounts when they want it to rise i