Decentralized oracle project Tellor (TRB) experienced a threefold surge on January 1st, followed by a more than 75% drop, causing many retail investors to suffer heavy losses on the first day of the new year. How did the controlling whales behind the scenes achieve this?
(Background:
Opinion: Was the volatile rise and fall of TRB a result of malicious actions by whales?
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(Introduction:
TRB surged to $629 and then plummeted by 80%, resulting in $60 million in liquidations across the entire network.
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Table of Contents:
1. TRB as a strong whale coin
2. Market sentiment
– Position holdings
– LSUR
3. Funding rates
Conclusion
To the surprise of many, January 1st brought a brutal “bloodbath” that marked the beginning of 2024, leaving the market in distress. In this silent battle, whales continued to employ the classic strategy of pumping and dumping, a tactic that many users may not be aware of. Let’s analyze this in detail.
First and foremost, it is important to understand that TRB is a coin controlled by strong whales. So how can we identify these strong whale coins? The best method is on-chain data, as whales do not hold large amounts of coins on exchanges; they must be on-chain.
On December 29th, spot on chain tweeted that approximately 95% of TRB is held by whales. Although it is stated that there are 20 whale addresses, we can assume that the chips are highly concentrated.
Now, let’s compare the total supply of TRB to the 21 million BTC. The answer is that TRB has a circulating supply of only 1.95 million coins. If 21 million BTC can push the price up to $40,000, then it is reasonable to expect TRB to reach $1,000. In fact, TRB has already reached $700 on OKX.
However, knowing that it is a strong whale coin is not enough. The question is, how will the whales manipulate it? Will they pump or dump the market? It entirely depends on the whales’ intentions, making it difficult to predict.
To analyze market sentiment, I will provide three indicators: position holdings, LSUR, and funding rates.
How do we analyze position holdings? Here is the trend before the explosion:
As the price rose, the position holdings increased, indicating that large funds were going long. But how can we distinguish between whales going long and retail investors going long? This is where the second indicator, LSUR, comes into play.
LSUR is a very useful indicator. LSUR > 1 indicates retail investors going long, while LSUR < 1 indicates retail investors going short. During TRB's surge, LSUR also increased, indicating retail investors joining the long side.What would you do if you were a TRB whale at this point? Yes, you would wash the market, and the extent of the wash would depend on your conscience!Then, the first classic scene occurred last night, with a rapid 30% drop within minutes. This washout was extremely brutal, resulting in a 30% drop, equivalent to 3x leverage. Even if you went long with 3x leverage, it would still be ineffective.Why 3x leverage? Long ago, OKCoin defaulted to 3x leverage, and later everyone used 3x leverage for arbitrage, considering it safe.At this point, the whales have finished washing the market. How many positions were liquidated during this washout? Looking at the decrease in position holdings, it seems significant, estimated at $30 million in liquidations.After TRB experienced a sharp 30% drop, what happened? Yes, major media outlets reported on the 30% plunge in TRB, making it the headline news for a while. What does this mean? It means that TRB has caught everyone's attention. Previously, many people may not have paid any attention to TRB or even known what it was, but now, after this publicity, many users are aware of it, and trading has begun.We must remember that trader attention is a crucial aspect because without popularity, it would be impossible to pump the price. Once popularity rises, the actual trading can begin.Here, we still rely on the LSUR indicator. Why? Because this indicator is truly useful for accurately determining the direction of the whales and retail investors.Whales and retail investors are opposites; retail investors going long allows whales to feast. We can see how retail investors view TRB.After the TRB plunge, everyone believed it would rebound, so they went long. After it dropped last night, retail investors began obvious long positions due to the significant increase in LSUR.Now, what's next? This is where we need to use our main force indicator!$250 is a critical point because the large order data shows that after surpassing this level, the main force continued to place many buy orders below the current price.Why do they operate like this? It's to attract market-making robots or some high-frequency trading robots that rely on the order book imbalance (OBI) strategy to actively buy and push up the price. By continuously using large buy orders, they drive market orders from robots, pushing up the market price. This was the classic operation last night.At 11 pm last night, after the TRB price returned to its original level, what happened? The price consolidated, position holdings decreased, and LSUR decreased. What does this mean? It means that everyone believed TRB had reached its peak, and they started closing positions and going short, causing the LSUR to decline.After TRB hovered around $290 for a long time, we naturally assumed it was a top. A series of data indicated that retail investors were not optimistic at this level. If the price were to rise, retail investors would still be determined to short.At this point, the perception of whales and retail investors has clearly changed: whales are bullish, while retail investors are bearish. The hunting moment begins!Moreover, it was late at night, it was New Year's Day, and everyone had to spend time with their families, celebrate the New Year, and sleep. This is why the explosive rally occurred at dawn and ended in the morning because it specifically targeted users in the GMT+8 time zone.This image is classic, with large buy orders from the main force supporting the price and LSUR continuously declining.Why doesn't the price drop? It's because the whales sense that you want to buy, so they buy in advance and wait for you to increase the buying price before selling to you.By pumping the price from $250 to $464, an 80% increase, can you guess how much the whales used? The answer is $40 million! Through $40 million worth of large orders, they achieved the feat of pushing the price from $250 to $464! When the price continued to rise, the whales were actually engaged in top-notch selling. The major uptrend occurred from the $250 to $464 stage, and during this stage, the whales only used around $40 million.Whale manipulation essentially involves accumulation, washing, pumping, and dumping. Now that the pumping phase is over, it is time for the dumping phase. During the dumping phase, the best strategy is to pump the price before selling.I have briefly illustrated a pattern: after the whales finish pumping, they enter the dumping phase. After a period of consolidation, there is a sudden pump to attract technical analysts to buy, followed by a rapid drop, triggering stop-loss orders. This pump and drop occurred around $464, which is a clear sign of dumping. At this point, the dip will attract retail investors to buy again, continuously pushing the price higher. However, since the whales have been continuously selling, the price rises slowly and cannot break the previous high.But it is important to note that in many cases, the second top in the cryptocurrency market can surpass the previous high, triggering stop-loss orders for shorts, and then the price drops. So in this pump, the whales showed some kindness; otherwise, they would have broken the previous high, triggered stop-loss orders, and then experienced a sharp drop, leaving you in tears.Kindness was indeed shown, but not much, as they caused a 70% drop! This drop basically exceeded the expectations of 99% of people!Why can they manipulate it this way? Because this is a coin controlled by capital, not fundamentals or technicals.So how did retail investors operate during the drop? Let's go back to the analysis of LSUR and position holdings. Retail investors like to buy the dip and hold positions, so during the drop, position holdings increased, and LSUR increased, indicating retail investors were buying.Also, take note of the highest price at $555; it has a humorous meaning. (It can be understood as a form of market language, with "555" representing crying, meaning "I'm going to dump, so cry about it." This scenario previously occurred on the BTCUSDT perpetual contract on OKEx at $44,444.)At this point, I want to mention the explosive funding rate! Last night, Binance settled the funding rate every four hours, and TRB had a funding rate range of +/- 2%. A funding rate of -2%, settled every four hours, was a significant temptation.A funding rate of -2% means that most participants in the contract market were shorting TRB, leading to TRB's price being lower than the spot price.Retail investors were shorting, so the main force was undoubtedly going long, as reflected in the LSUR data. Therefore, this judgment was verified from multiple data sources.However, generally, traders who only trade on one side rarely pay attention to the funding rate. So, who does care about the funding rate? Yes, arbitrage traders!What arbitrage opportunities arose last night? The TRB funding rate was negative, allowing for reverse arbitrage. However, reverse arbitrage requires having coins, and whales typically borrow all the coins in advance to avoid interference with their operations. Therefore, reverse arbitrage is usually not feasible. Instead, arbitrage traders often use dual-contract arbitrage.Applied to TRB: Going long on Binance's TRB USDT contract and going short on OKEx's TRB USDT contract.Why do it this way? It's to take advantage of the funding rates settled every four hours: - Binance funding rate: -2% (settled every four hours) = -8% - OKEx funding rate: -1.5% (settled every eight hours) = -1.5%Let's calculate the profit: 8-hour profit is 6.5%, and since it's arbitrage, there are both long and short positions, making it relatively safer. That's why most arbitrage traders took advantage of this trading opportunity last night.However, arbitrage also carries risks, especially cross-exchange arbitrage. The core risk lies in the exchanges suspending withdrawals, causing the price difference to be uncontrollable. Another risk is if the price is pumped too aggressively, causing one side to explode, resulting in a one-sided position. If you quickly close the position after it explodes, the loss won't be significant. But if you leave the position open, it will create a one-sided risk.That's how we saw the price of over $700 on OKEx because the depth on OKEx is shallower, and arbitrage traders opened short positions on OKEx, resulting in a cascade of short liquidations, ultimately driving the price on OKEx much higher than on Binance. The contract price of over $700 on OKEx was a result of arbitrage traders continuously liquidating shorts.Arbitrage is an important participant in the market, but if risk management is inadequate, it can lead to significant problems. However, last night's TRB was a nightmare for arbitrage traders, and many people got liquidated. So, when trading, it is essential to pay attention to risk control, set strict stop-loss levels, and avoid turning small losses into big disasters. At the same time, if you were able to combine trading based on large orders and the whales last night, the gains would have been very fruitful.TRB has now completed the process of dumping and selling. Due to the large number of users liquidated during this wave, it is unlikely to see new market trends in the short term. Even if a new market trend emerges, it will require another round of accumulation and washout.The retrospective of this bloodbath in TRB is essentially complete. To summarize, if we want to make money in this wave, we need to fully utilize the following methods:1. Identify strong whale coins. 2. Identify abnormal funding rates, LSUR, and position holdings. 3. Combine main force large orders (or large trades) for main force funding analysis. 4. Set strict stop-loss levels.Combining main force large orders is the best choice for grasping the whales' funding control. Whether buying or selling, it will eventually be reflected in the market. As long as there are orders and trades, we can monitor them, so everyone must make good use of these methods!Related News: Opinion: Was the volatile rise and fall of TRB a result of malicious actions by whales? TRB surged to $629 and then plummeted by 80%, resulting in $60 million in liquidations across the entire network. TRB has an extremely high negative funding rate: Will it continue to surge or collapse?