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What are buy and sell walls in crypto, and how can one identify them?

Whales can manipulate buy and sell orders because they can deploy excessive capital into the market.

In cryptocurrency trading, a “buy wall” is a massive buy order, or multiple buy orders, around a particular price level. Conversely, a “sell wall” is a significant accumulation of sell orders at a given price level.

Before understanding how buy and sell walls work, it is important to know what an order book and its market depth are.

What is an order book in crypto trading?

An “order book” is an index listing buy and sell orders for a specific cryptocurrency based on price levels. A trade is executed when the orders on either side meet at a certain price level, establishing the cryptocurrency’s price as supply meets demand.

BTC/USDT order book example. Source: Binance

Nonetheless, these orders don’t get executed randomly — rather, the market fulfills them in the order of their sequence.

For example, two open orders are created when Peter Griffin attempts to sell 1 Bitcoin (BTC) for $25,000 and Cleveland Brown places an order to buy 1 BTC at $24,000. Suppose Glenn Quagmire joins in and tries to sell 1 BTC for $26,000. As a result, there are three unfulfilled, open orders.

But when a new buyer, Joe Swanson, enters the market and tries to buy 1 BTC for $26,000, he does not get Quagmire’s coin. Instead, he receives Griffin’s BTC for $25,000, and the Bitcoin spot price becomes $25,000. 

Meanwhile, Brown’s and Quagmire’s orders will remain open. 

What is market depth?

The open orders are packed together as buy and sell orders and pitted against one another on a market depth chart.

BTC/USDT market depth chart. Source: Binance

The X-axis on the graph represents the bid (buy orders in green) and the ask (sell orders in red) price, while the Y-axis represents the cumulative market volume.

Identifying buy and sell walls

A large spike sloping upward on the market depth chart’s either side is called a “wall.” These walls appear as deeper vertical lines resembling the side angle of a staircase, as seen in the example above.

A buy wall is formed when the number of buy orders massively exceeds the sell orders at a given price, thus illustrating greater demand for the cryptocurrency versus its supply. As a result, traders see the levels where buy walls appear as areas of support for a potential bounce.

Market depth chart illustrating buy and sell walls. Source: Phemex

Similarly, a sell wall is created when the number of sell orders surpasses the buy orders, showing weaker demand versus supply at a certain price level.

Related: How to trade bull and bear flag patterns?

A big buy wall against a drastically smaller sell wall on the market depth chart suggests strong demand and that the path of least resistance is currently to the upside, and vice versa.

Ultimately, viewing the order book as “walls” makes it easier for traders to spot potential areas for price rebounds and rejections.

As a note of caution, buy and sell walls should not be solely relied on to predict price direction. Orders can be pulled or introduced anytime, with market dynamics always in flux.

Moreover, “whale” traders can use their large capital to create or remove large walls of orders as a way to manipulate the market to their advantage.

For more tips about spotting and avoiding potential market manipulation, check out Cointelegraph’s previous coverage

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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What is opportunity cost? A definition and examples

Opportunity cost is the potential benefit that is missed out on when choosing one option over another.

Opportunity cost, explained

Opportunity cost is a concept in economics that refers to the value of the next best alternative that is forgone when making a choice — i.e., the cost of the best alternative that is not chosen.

Consider the scenario when you have a limited budget and are debating between buying a new laptop or going on vacation. The value of the vacation you could have taken with the same amount of money would be the opportunity cost if you decide to buy the laptop. Similarly, if you decide to take the vacation, the opportunity cost would be the laptop you could have purchased with the same amount of money.

Opportunity cost is a crucial factor to take into account when making decisions because it enables you to weigh the advantages and disadvantages of many options and come to the best decision possible based on one’s preferences and limits. By understanding the opportunity cost of a decision, individuals can better assess the true costs and benefits of the choices available to them.

Relevance of the opportunity cost concept in the crypto world

Opportunity cost is an important notion in the crypto industry because it is a highly speculative industry with large potential rewards and losses. The opportunity cost of hanging onto a certain asset vs. investing in a different asset must be considered by cryptocurrency traders and investors.

Consider a trader who made an investment in a cryptocurrency that has recently seen a significant rise in value. The trader can be tempted to keep the asset in the hopes that its value will rise more, but doing so prevents them from investing in other assets that might have superior growth potential. On the other hand, if the trader sells the asset to invest in another cryptocurrency that they believe has better growth potential, they risk missing out on potential gains if the original cryptocurrency continues to rise in value.

While miners choose what cryptocurrencies to mine based on expected profits and the resources needed to mine each asset, opportunity cost is also important in the cryptocurrency mining process. Miners can increase their profitability and prevent losing out on opportunities by weighing the opportunity cost of mining one cryptocurrency over another.

Related: What are the different ways to mine cryptocurrency?

Opportunity cost vs. sunk cost

Opportunity cost refers to the potential benefits that are foregone by choosing one option over another, while sunk cost refers to costs that have already been incurred and cannot be recovered. Opportunity cost and sunk cost are both concepts used in economics and decision-making analysis, but they represent different things:

A cryptocurrency investment that has seen a considerable drop in value is one example of a sunk cost. A person’s investment in a cryptocurrency becomes a sunk cost once they’ve made it; they can’t get their money back until the value of the cryptocurrency increases.

For instance, suppose an investor spends $10,000 on a cryptocurrency, after which the value of that coin falls to $5,000. The initial $10,000 investment becomes a sunk cost if the investor chooses to keep the coin rather than sell it. This is due to the fact that the money has already been spent and cannot be recovered until the value of the cryptocurrency increases. The sunk cost fallacy may be at play if the investor keeps holding onto the crypto in the hopes that its value will rise, which could result in greater losses.

The opportunity cost of using blockchain: How does it affect business?

Blockchain technology has the potential to revolutionize the way businesses operate. However, using blockchain comes with opportunity costs that businesses need to consider. Therefore, companies must weigh the potential advantages of blockchain technology against the costs and trade-offs of deploying it before deciding whether to use it.

The greater security and transparency that blockchain technology offers is one of its main advantages. Blockchain offers a safe way to store and distribute data because it employs a decentralized ledger that is nearly impossible to compromise. Businesses handling sensitive information, such as financial or medical data, may find this to be very helpful. Also, the openness of blockchain can foster greater interparty trust, which is advantageous for companies operating in industries with a high degree of risk or fraud.

As mentioned, there are costs and trade-offs associated with using blockchain. The cost of developing and maintaining the technology is one of the major expenses associated with using blockchain. Blockchain technology is still in its infancy, and its implementation can be expensive. A blockchain network also needs a lot of computational power to be maintained, which can be expensive.

Related: 10 emerging technologies in computer science that will shape the future

Furthermore, the chance of missing out on alternative technology or solutions is another opportunity cost of embracing blockchain. Companies that aggressively invest in blockchain technology might miss out on chances to fund other cutting-edge technologies that might prove more beneficial in the long term.

Voyager’s $1B sale to Binance.US put on hold by US court

Tel Aviv Stock Exchange moves toward offering crypto trading

Israel's sole public stock exchange wants to allow its clients to trade crypto but is facing regulatory resistance.

A draft for the approval of an expansion of crypto trading activities to non-banking members has been published by the Tel Aviv Stock Exchange (TASE) for public comments.

In a TASE first, a Feb. 27 announcement stated the proposed structure will enable customers to deposit fiat money designated for investments in digital assets.

Non-banking members will act as licensed providers for crypto trading and custodial services should the proposal be approved. Customer funds will be placed in an “omnibus account” as the intermediary for crypto trading activities.

It will also allow clients to withdraw funds originating from the sale of crypto but the process is somewhat convoluted. This has been done to mitigate risks and enhance consumer protection, according to the announcement.

“This is another step in the advancement and development of the Israeli capital market that aims to encourage innovation and competition while mitigating the risks and protecting the customers.”

Once comments have been submitted, the proposal will be sent for approval by the TASE Board of Directors, however, no timeframe was provided.

The lobby of the TASE building, located in central Tel Aviv. It is Israeli's only public stock exchange. Source: Yaniv Morozovsky

Things may not go so smoothly for the Tel Aviv Stock Exchange and its crypto trading ambitions, however.

The regulatory outlook in Israel is becoming harsh for the sector as a proposed law plans to classify crypto assets as securities. In January, the Israeli Securities Authority (ISA) proposed a framework for regulating digital assets, placing them under the umbrella of securities.

In February, the CEO of Israeli crypto trading and custody firm Altshuler Shaham Horizon, Ilan Sterk, told Cointelegraph that the reclassification is “changing everything here,” and added, “it will kill the industry.”

Related: Proposed Israeli law to classify crypto as securities will hurt the industry, says crypto exec

The TASE announcement stated the current regulatory approach in Israel is to “impose regulation on financial activities or services in digital assets similarly to that currently applied to non-digital assets.”

However, the TASE remained confident, concluding:

“TASE believes that the alignment of local regulation with international regulation will attract more foreign investments and foreign investors into the Israeli market.”

In September, Israeli crypto exchange Bits of Gold became the first in the country to receive a license from the Capital Markets Authority.

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Redditor could lose young family after crypto trading addiction spirals

What began as a Redditor “just dabbling” two years ago blew into full-blown crypto trading addiction that all came to a head three weeks ago.

A self-confessed crypto trading addict and father of two is facing the dire prospect of losing his family forever after secretly racking up $180,000 in debt from his crypto trading habits. 

Posting his story on the r/relationship advice subreddit on Feb. 21, Reddit user “Leather_Opposite2135” said he started dabbling in cryptocurrency trading around 2021.

Fast forward two years to the present day and he’s been kicked out by his wife and is at least $180,000 in debt.

Excerpt of one of the comments by the original poster responding to another Redditor. Source: Reddit

“It started just dabbling,” said Leather. “It’s a tech space so I found it very interesting. Joined a bunch of online spaces (discord) and eventually watched a few people trading btc and immediately got hooked.”

Within a year, he had already “burnt” $50,000 from trading cryptocurrency, with the funds lost coming mainly from his software business.

“Skip forward another year and it got really bad,” said Leather, noting that his addiction had started to take hold as he started to fund his trading through other means, such as personal loans and credit cards.

“I’m sure you’ve heard it before, but I found all sorts of ways to fund it, including getting personal loans, credit cards, lying about all of it.”

“I was gambling on my phone when I went to the bathroom, when the kids were sleeping, on my computer when not busy with work.”

Leather noted that around three weeks ago he finally came clean about the debt to his wife, who didn’t take the news well, threatening to leave him and take ownership of their house.

He’s since banned himself from crypto, handed over control of his trading accounts to his wife, and has been seeing a gambling addiction counselor weekly, but admitted it was initially hard to shake the addiction.

“Emotionally, I was all over the place for the first 2 weeks. Cold turkey from something I spent 10 hours a day on (minimum) [...] All the while the little voice telling me to go looks at charts on the shoulder.”

The original post has since been deleted by Leather_Opposite2135 on Reddit but is neither the first nor last story shedding light on the possible dangers of crypto trading addiction.

Rehabilitation centers around the world have begun adding crypto trading addiction to their list of services treating compulsive habits, next to alcohol, drugs and behavioral health.

Crypto rehab center based in the United Kingdom. Source: Castle Craig

“Clinically, we have certainly seen an increase in people coming to therapy who report difficulties in managing their crypto trading behavior,” clinical psychologist Dr. Anastasia Hronis told Cointelegraph in an email.

“In a similar way to gambling, many of them will report that it disrupts their day to day life, they spend a lot of time thinking about it, and may also be experiencing financial hardship as a result.”

Dr. Hronis noted that similar to online gambling addiction, there is an “ease of accessibility” with crypto trading “that can be quite dangerous for individuals.”

Related: How to build a crypto portfolio without spending any money or time trading

“A person can be seen to be engaging in their normal day-to-day life e.g. going to work, spending time with family and friends, participating in hobbies etc, while still trading alongside. This means that an addiction can actually become quite severe before anyone else in that person's life notices.”

“Given the newness of crypto trading, I think that treatment is still catching up to some degree. While the general principles of treating an addiction can certainly be applied here, there are nuances with crypto trading that would benefit from being better understood for better inform clinical treatments,” added Dr. Hronis.

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