Understanding the Concept of a Buy Wall
In cryptocurrency trading, exchanges often employ a central limit order book (CLOB) to facilitate transactions between traders.
Buy Orders, Order Books, and Market Prices
When a trader wants to buy a specific amount of cryptocurrency, they submit a buy order to the exchange indicating the desired price and quantity.
This buy order joins the order book, a publicly accessible record of all buy and sell orders placed by traders.
The exchange then matches these buy orders with sell orders from other users, executing transactions at various price levels and quantities.
Alternatively, traders can fill their orders at the current market price, which the CLOB immediately fulfills based on existing orders.
Creating Stability in Cryptocurrency Markets
A buy wall refers to a scenario where a large limit order is placed to purchase a cryptocurrency when it reaches a predetermined value.
Traders sometimes employ this tactic to create an impression in the market and prevent the cryptocurrency from falling below that value.
When the buy order is executed, the demand typically surpasses the available supply, stabilizing the price above the defined threshold.
Usually, a buy wall is established by a significant buy limit order for a disproportionately large amount of coins, often placed by a cryptocurrency whale.
Strategies and Implications in Cryptocurrency Markets
One common purpose of creating a buy wall is accumulating a substantial amount of a particular cryptocurrency, indicating a bullish sentiment toward the asset.
Another motive behind establishing a buy wall is price manipulation.
In this case, a cryptocurrency whale, who possesses a significant amount of a particular cryptocurrency, may be concerned about the public perception of their asset.
Consequently, they employ their resources to acquire additional coins and bolster the price, creating an illusion of more excellent market health.