What is a Wall in Crypto?
In chart analysis, walls refer to high-volume limit orders that one or many traders place at strategic prices.
As the asset approaches the wall price, it triggers scheduled orders that slow it down or even reverse the trend (depending on the offset). Buy and sell walls help traders locate support and resistance levels in the price chart.
Crypto walls are measured in token quantity (vertical axis) and arranged by price (horizontal axis) in the depth chart:
What is a Buy Wall?
“Buy Wall is the result of one very large buy order or multiple large buy orders placed at the same price in the order book of a particular market, preventing the market price from dropping below the amount at which the buy orders were placed.”
Latham & Watkins LLP
The buy wall shows where the asset buying pressure is concentrated, where other traders could potentially buy. Typically, traders compare the depth chart with the order book to find whether the wall is created by a few “whales” or several smaller traders.
Once the price is reached, if the buy wall volume (green) exceeds the selling volume (red), chances are that the devaluing crypto will likely bounce back up. Otherwise, it will move sideways until it exhausts all the buy wall volume and keeps dropping afterward.
In practice, buy and sell walls aren’t reached that frequently, because their mere presence makes investors anticipate and move prices away from them. Moreover, the intent behind buy walls isn’t always straightforward:
- Investors out of the market are prepared to buy
- Investors already in the market are still adding to their positions at lower prices, possibly anticipating a dip or dollar-cost averaging (DCA)
- Crypto whales are already invested and place massive orders, not as an investment strategy, but as a manipulation tactic to create confidence and attract more investors.
Large investors might create walls on both sides and can also cancel limit orders at any time.
What are the Key Differences Between Buy Wall and Sell Wall?
Buy and sell walls are opposite versions of the same reaction:
- Strategy: Not considering manipulation, traders generally want to buy a falling asset right before the buy wall and take profits right before a sell wall.
- Positioning: Buy walls show the amount of volume available to invest in the asset. Sell walls reveal the volume already invested or shorted.
Conclusion
Buy and sell walls help traders understand where price volatility is more likely to occur. It’s worth noting that depth charts don’t show large stop-loss orders below the current price that could invalidate buy walls. The walls should not be interpreted as trend changes.
Latham & Watkins LLP. (2022). The Book of Jargon® – Blockchain, Crypto & Web3. lw.com.
https://www.lw.com/en/book-of-jargon/boj-blockchaincryptoandweb3
Coinweb requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial process.
