Sell Wall Definition
A sell wall in the crypto market refers to a situation where a large number of sell orders (for a specific cryptocurrency) are placed simultaneously at the same price point. The name derives from the visual appearance on a depth chart which resembles a “wall”. A sell wall can dramatically affect the price and trading volume of a given cryptocurrency by creating a temporary barrier where the price cannot pass until all the sell orders are fulfilled.
Sell Wall Key Points
- A sell wall is formed when a concentration of sell orders occur at the same price point in the cryptocurrency market.
- The phenomenon is visually depicted as a “wall” in a depth chart.
- It acts as a momentary barrier for price fluctuations, preventing the price from moving beyond until all the orders are executed.
- Sell walls can greatly impact the price and trading volume of a particular cryptocurrency.
What is a Sell Wall?
In crypto trading, a sell wall is created when a mass amount of sell orders are set at an identical price. This surge of orders causes an apparent blockade in the price chart that stops or hinders the price of the cryptocurrency from escalating until all the sell orders on that level are executed. It forms a ‘wall’ of sell orders that other traders must buy into if they want the price of the cryptocurrency to rise further.
Who Uses a Sell Wall?
Large traders, often known as whales, typically generate sell walls. The purpose of a sell wall could be to create a price blockade to accumulate more of a specific cryptocurrency at a lower price or to manipulate the market perception. Nevertheless, smaller traders who watch these walls can navigate the market more adequately by predicting possible price movements.
When is a Sell Wall Used?
A sell wall is usually used when a trader wants to prevent the price of a crypto-coin from rising above a certain point. When a trader spots a sell wall, it implies that it may be difficult for the price to move past the wall until the entire volume of coins on sale at that price point is bought.
Where Does a Sell Wall Appear?
Sell walls appear on a depth chart, a graphical representation of the current market situation. They are visible on the trading platform where orders are placed. The sell wall is shown on the upper part of the chart where it often can be seen clearly.
Why Does a Sell Wall Occur?
Sell walls can be a form of market manipulation. They can scare away potential buyers who see that a large amount of a certain crypto-coin will need to be bought before the price can rise. Once this discouragement leads to a drop in price, the entity responsible for the sell wall can then buy the crypto-coin at a lower price.
How Does a Sell Wall Affect the Market?
A sell wall can substantially influence the market. Firstly, it acts as a figurative ‘wall’ that halts the price from exceeding it until the wall is broken down, i.e., all the sale orders at that price are executed. This can lead to panic selling if the sell wall is huge, leading to a sharp drop in the price. Secondly, market sentiment can be affected as traders might feel the price would not exceed the sell wall, leading to a downward pressure on the price.
