What is Buy Wall in Crypto Trading?
A buy wall forms as a result of a single huge buy order or the composition of multiple large buy orders placed at the same price in the order book of a crypto pair.
Buy walls can be created by whales, groups of traders, or institutions.
What is an Order Book?
A trader must understand how to interpret an order book to effectively identify buy and sell walls on a true volume cryptocurrency exchange.
Technically, an order book is a list of buy and sells orders for a crypto pair, organized depending on pricing. An order book dynamically lists the number of assets being bid or offered at each price point in real-time. They consist of unfulfilled buy and sell orders and market order history.
In any order book, you will see the terms “bid” and “ask,” which are orders for buying and selling, respectively.
Common Buy Wall Practice
Once there is a block order, often other traders tend to place their orders slightly above or below the wall, depending on their trading strategies.
For instance, if a big buy wall for Bitcoin is placed at $20,000, other traders that are willing to buy tend to place their order at $20,100 or above. Traders arrange their orders this way, firmly believing there is a low probability of their orders being filled if they are placed at the $20,000 level or slightly behind the wall, at $19,900 or lower.
How do I find walls to buy?
Accordingly, traders respond by setting their buy orders even higher than the buy wall to get their hands on the cryptocurrency or stock and get in on potential profits before the assets are scooped up. This drives prices up even further.
However, it is essential to note that buying walls often does not reflect actual market sentiment. Small buy walls often print, typically, around psychological round numbers. This is noted by many traders, who respond by pricing their buy orders in and around the buy wall.
Buy walls can also be artificially created to manipulate price action. Since buy orders are dynamic and can be added or removed at a trader’s discretion, buy walls can be used as a form of market manipulation and may not represent a true interest in buying the cryptocurrency at that price.
How to Use the Market Depth to Evaluate a Buy/Sell Wall?
Market depth refers to the number of assets available for buying or selling at a given price point. In crypto, a market depth is considered “deep” when there are high volumes of pending orders on both the bid and ask sides.
Large market orders less easily manipulate prices at any particular price since these are absorbed into the large volume of overall rankings. It is thus less likely for them to have a huge influence on price. In such cases, trades can dismiss them and fail to use them as signals.
However, there is no fixed guideline in determining whether a buy wall or sell wall is real, and much of it relies on your discernment.