How to “Legally” Steal Your Bitcoin

how they manipulate markets to steal your bitcoin

18 ways the markets use to make you give up your precious bitcoin

In my previous article titled “Bitcoin’s Great Dichotomy”, I have explained why in the short term bitcoin trades as if it were a leveraged tech stock.

Simply because those who control short-term price discovery decided so.

This artificial correlation is extremely convenient for large market players:

• Volatility becomes predictable.

• Liquidity cascades become engineerable.

• Weak hands become extractable.

• A perfectly scarce monetary asset becomes temporarily “cheap.”

And when the market is structured around leverage, stop-losses, derivatives, and automated algo trading, a sufficiently large actor can create price swings powerful enough to shake out weak hands and absorb their bitcoin.

Thus, short-term bitcoin price is driven not by what Bitcoin is but by what traders pretend it is. Below I will expand on at least 18 ways that have been historically used to manipulate the price of bitcoin and therefore shake out weak hands in favor of smart players who have used the opportunity to accumulate bitcoin at cheaper prices.

1. Spot Market Slams Triggering Liquidation Cascades

This is the most common and well-documented mechanism in bitcoin’s market structure. Because bitcoin trades on highly interconnected spot and derivatives markets, a relatively small amount of spot BTC (sometimes as low as $20–50 million) can push price below critical liquidation thresholds. Once price breaches these zones, cascading liquidations occur in perpetual futures markets, where leverage is extreme. Small downward moves thus trigger forced selling by over-leveraged long traders, who are liquidated automatically by exchanges. This forced selling pushes price further down, which triggers more liquidations, leading to a self-reinforcing chain reaction. These events can create multi-billion-dollar liquidation cascades within minutes — as seen on May 19, 2021, December 4, 2021, and numerous smaller events. It is not illegal manipulation; it is the market exploited efficiently by large players. The wolf eats the lamb.

2. Coordinated Sell Pressure Across Multiple Exchanges

Because bitcoin trades globally and around the clock, coordinated selling across several major spot venues — Coinbase, Binance, Bitstamp, Kraken — can create the illusion of a broad-based selloff even if the underlying selling volume is modest. When order books thin simultaneously across exchanges, market participants perceive the move as systemic rather than local. This sparks copycat selling from automated trading systems, arbitrage bots, and retail traders monitoring multiple platforms. The power of this mechanism lies in how order books appear, not the real economic selling pressure. Again it is legal and relies on exploiting public, transparent exchange depth. Again, the wolf eats the lamb.

3. Derivatives Pressure Leading to Deeply Negative Funding Rates

Perpetual futures dominate bitcoin's price discovery. By aggressively shorting perpetual futures, sophisticated traders can force funding rates deeply negative. This makes long positions expensive to maintain, encouraging traders to close their longs while incentivizing others to open shorts. The resulting imbalance pushes futures price below spot price, creating arbitrage opportunities where bots sell spot to buy discounted futures — pulling spot down mechanically. These funding-driven squeezes can grind markets lower for days while producing a clean transfer of bitcoin from weak hands to strong hands, who happily accumulate at depressed prices. Always, the wolf eats the lamb.

4. Weekend Liquidity Exploits

Despite bitcoin is the only asset which trades 24/7 365 days, its liquidity drops on weekends and holidays. Professional trading desks are offline, institutional arbitrage is reduced, and market makers scale back inventory provision. This creates a perfect environment for large players to push price down through relatively small trades on spot exchanges. Historically, many of the largest liquidation days occurred on Fridays after U.S. market close and weekends. This mechanism is not manipulation — it is simply taking advantage of predictable liquidity vacuums. Retail traders, unaware of liquidity dynamics, get liquidated en masse during these periods. After all they are always lambs for the wolfs.

5. Spoofing & Fake Sell Walls

Spoofing involves placing large sell orders that are not intended to be executed, purely to influence market psychology. These “walls” appear in the order book and intimidate buyers, causing price to drift downward. Once the desired psychological effect is achieved, the orders are removed. While spoofing is illegal in regulated equities markets, enforcement in crypto exchanges is limited, fragmented, and often unenforceable. This allows traders to influence sentiment cheaply, contributing to short-term downward price pressure without selling actual bitcoin.

6. Exchange Outages at Critical Moments

When major exchanges freeze during periods of high volatility, traders cannot adjust positions, add collateral, or cancel orders. This means their leveraged positions continue drifting toward liquidation with no recourse. Exchanges often claim “overload,” but outages typically occur during violent downward moves — precisely when liquidations benefit market makers who remain operational internally. Whether intentional or not, the structural effect is clear: outages exacerbate downward cascades by preventing user intervention. This phenomenon was observed repeatedly in 2017, 2021, and early 2022.

7. DeFi Oracle Manipulation

Decentralized lending platforms rely on price feeds (“oracles”). If a malicious actor manipulates the price on a low-liquidity exchange that the oracle references, they can trigger artificial liquidations on DeFi platforms like Aave or Maker. Even if the broader market price never touched the liquidation price, borrowers can lose collateral due to oracle distortions. This has occurred numerous times in DeFi history. While often labeled an “exploit,” it is still essentially the wolfs “legally” manipulating markets within the rules of smart contracts to eat the lambs.

8. Targeting Over-Leveraged Retail Clusters

Retail traders – pardon “lambs” - tend to cluster their stop-losses around obvious technical levels: round numbers, major moving averages, and prior support zones. When price approaches these levels, traders with enough capital can deliberately push it below them — triggering predictable waves of forced selling. This makes retail liquidation a mechanical process. The wolfs - sophisticated traders and market makers - monitor position heatmaps showing liquidation clusters, and they know precisely where liquidity lies. Triggering these levels creates a highly profitable volatility event for those positioned correctly.

9. Miner Capitulation Pressure

Bitcoin miners are natural sellers. When hashprice falls or electricity costs rise, miners may be forced to sell BTC holdings to cover expenses. If miners are also over-leveraged (as many were in 2022), they can be forced to liquidate reserves rapidly during downturns. Large actors can anticipate these moments and push price down just enough to trigger miner capitulation, creating multi-day selling pressure. The 2018 bear market bottom and several 2022 capitulation waves were driven by this dynamic.

10. Stablecoin Liquidity Shocks

Because Bitcoin trades heavily against stablecoins, any destabilization of a major stablecoin (e.g., Tether FUD, USDC depegging, UST collapse) causes panic in BTC markets. Traders flee into fiat, deleverage, and unwind positions linked to the unstable stablecoin. Even mild uncertainty about backing or regulation can trigger liquidity drains. This is particularly powerful because stablecoins are integral to exchange collateral, lending platforms, and derivative margining.

11. Macro “Risk-Off” Narratives Pushed by Institutions

Institutions often publish research notes framing bitcoin as “high beta tech.” This encourages quant desks and systematic funds to treat bitcoin as part of the risk-on/risk-off playbook. Negative macro events (inflation spikes, rate hikes, war, recession fears) trigger algorithmic selling in bitcoin not because Bitcoin’s fundamentals as a safe haven have changed, but because Wall Street framed it as a risk asset rather than a safe haven. This narrative engineering is subtle but extremely effective at shaping short-term price dynamics.

12. ETF Flow Reversals & Authorized Participant Arbitrage

Spot Bitcoin ETFs introduced powerful new arbitrage loops. Authorized participants can create or redeem ETF shares in exchange for bitcoin. Heavy ETF outflows mean APs sell BTC into the spot market to satisfy redemptions. Large firms can front-run expected outflows based on public sentiment or market conditions. Even modest ETF outflow predictions can push price down algorithmically because traders know redemptions lead to spot selling. This an example today: Blackrock sends 4.471 bitcoin to Coinbase. Will they flood the market to be sold? Likely not. Regardless, this will increase sell pressure artificially and will benefit some buyers.

13. Regulatory Headlines Timed During Thin Liquidity

Regulatory “news drops” often occur during low-liquidity hours (late U.S. evenings or weekends). Even harmless announcements — investigations, comment letters, proposed rules — create panic selling if released strategically. Even if regulators may not intend this, large traders exploit it. The result is a powerful narrative shock that triggers deleveraging at predictable times.

14. Exchange Token Collapses Causing Forced BTC Selling

When FTX, Celsius, Voyager, BlockFi, or others collapsed, they triggered forced sales of bitcoin held as collateral or reserves. These events generated massive downward pressure independent of Bitcoin’s fundamentals. Sophisticated traders can anticipate these bankruptcy unwind events and position for them. These collapses are systemic shocks that temporarily overwhelm organic demand.

15. OTC Desk Illiquidity Exploitation

OTC desks are where institutions accumulate bitcoin quietly. If an OTC desk becomes illiquid due to macro stress, insolvency, or custodial issues, large buyers may temporarily retreat. This removes “background bid support,” making spot markets more vulnerable. Large traders can exploit this by pushing spot down precisely during OTC downtime, scooping up bitcoin cheaply once OTC operations resume.

16. Algorithmic Correlation Trading Systems

Many quant funds run statistical arbitrage: if NASDAQ falls 1%, Bitcoin is sold automatically regardless of its fundamentals. These algorithms create synthetic correlation between BTC and tech stocks even if no logical linkage exists. Those who understand Bitcoin’s fundamentals are unaffected; traders who follow algos amplify price swings. This correlation can be exploited by triggering bitcoin selloffs independently of its fundamentals.

17. Volatility Harvesting Strategies

Some hedge funds profit from increasing the volatility of bitcoin rather than predicting direction. They enter positions that benefit from sharp moves up or down. These strategies often involve triggering liquidation zones on both sides of the market — first the longs, then the shorts. This creates whipsaw price action. Retail traders lose, strong hands accumulate, and volatility harvesters capture profit. Lambs are eaten as usual.

18. Cross-Asset Pressure: Attacking Bitcoin Proxies

Bitcoin sentiment is strongly influenced by Bitcoin proxy equities such as:

• MicroStrategy (MSTR)

• Public miners (MARA, CLSK, RIOT)

• Bitcoin-adjacent tech firms

Applying downward pressure on one or more of these stocks affects sentiment and can trigger selling of BTC. Because these equities trade during regulated hours with higher liquidity, they are easier to pressure than Bitcoin itself. Once proxy equities fall, bitcoin often follows due to correlation trading and retail sentiment shocks. And this brings us to the latest case of JP Morgan attack on MSTR this week.

The MicroStrategy/JPMorgan Report Example

The recent JPMorgan “index delisting risk” report on MicroStrategy demonstrated a subtle but powerful mechanism:

1. A report highlights hypothetical index eligibility risks.

2. Media amplifies the headline into a narrative of danger.

3. MSTR falls sharply as passive funds and retail react.

4. Weak treasury holders with bitcoin exposure panic.

5. They reduce exposure or sell BTC-based assets.

6. Bitcoin spot drops.

7. Leveraged traders get liquidated.

8. Strong hands accumulate BTC at discounted prices.

This shows how bitcoin selloffs not always begin in bitcoin markets.They can be induced externally via equity channels, media cycles, and liquidity spirals.

Why These Games Work

Bitcoin traders are the lambs for the wolfs and get always slaughtered. They are frequently

• Over-leveraged

• On exchanges

• Using borrowed money

• Using custodial wallets

• Exposed to correlation trading

• Reacting to fear and news

• Trading, not accumulating

If you genuinely understand Bitcoin, there is only one simple strategy:

• Self-custody your coins.

• Do not keep bitcoin on exchanges.

• Do not trade short-term moves.

• Do not over-collateralize or borrow against bitcoin.

• Do not use bitcoin as leverage collateral.

• Understand what bitcoin IS, not what traders pretend it is.

If you understand the game, you avoid becoming the liquidity that feeds it.

Conclusion: Bitcoin Is the Signal — Markets Are the Noise

The short-term bitcoin market is a battlefield of:

• leverage

• liquidity games

• institutional hedging

• derivatives

• media narratives

• volatility harvesting

• automated correlation trading

But Bitcoin itself remains completely untouched by these distractions.

Bitcoin is what it always was:

• A neutral peer to peer monetary protocol

• An incorruptible ledger

• An absolutely scarce digital asset

• A long-term store of value

If you look past the fog and if you price the world in bitcoin, it is not bitcoin that is volatile — fiat and financial markets are volatile.

And once you recognize this distinction, nobody will “steal” your bitcoin ever again. So if you are not the wolf, at least avoid being the lamb.