Have you ever wondered what buy and sell walls are?

Cryptocurrencies have become a popular asset class for investors in recent years, and as the digital currency markets mature, more and more powerful tools are being developed to facilitate trading. One of the prominent features available within many cryptocurrency exchanges is the ability to observe buy and sell walls – but what exactly are they? In this blog post we’ll take an in-depth look at this feature, exploring what it is all about, how it can be used, and why it’s so important to understand if you’re entering into the world of crypto investing.

Whales can exploit the market by investing large amounts of capital, allowing them to manipulate buy and sell orders.

When trading cryptocurrency, a “buy wall” is an accumulation of large buy orders or multiple buy orders around one price. On the other hand, when you spot a “sell wall,” it means there’s an abundance of sell orders set at that particular cost level.

Comprehending the intricacies of buy and sell walls necessitates a strong grasp on an order book’s market depth.

Are you curious about what an order book is in the realm of cryptocurrency trading?

An “order book” is a directory of orders to purchase or sell cryptocurrency at specified prices. When an offer from one side matches that of the other, the trade occurs, determining the value of said cryptocurrency as demand intersects with supply.

Despite this, these orders are not simply processed in a chaotic manner—rather, they are completed according to the sequence of their respective order.

For example, two open orders are created when Person A attempts to sell 1 Bitcoin 

for $25,000 and Person B places an order to buy 1 BTC at $24,000. Suppose Person C joins in and tries to sell 1 BTC for $26,000. As a result, there are three unfulfilled, open orders.But when a new buyer, Person D, enters the market and tries to buy 1 BTC for $26,000, he does not get Person C’s coin. Instead, he receives Person A’s BTC for $25,000, and the Bitcoin spot price becomes $25,000. 

Meanwhile, Person B and Person C’s orders will remain open. 

Market depth? What is it?

Buy and sell orders are combined in a market depth chart to form open orders which are then pitted against each other.

Identifying buy and sell walls

On the market depth chart, a noticeable incline on either side is referred to as a “wall.” This wall appears like an angle of steps and consists of deeper vertical lines.

Buy walls are created when a tremendous number of buy orders outweighs the sell orders at a particular price point, suggesting there is an elevated demand for this cryptocurrency in comparison to its availability. As such, savvy traders identify these buy wall areas as potential support levels that can result in meaningful price gains.

When the amount of sell orders outweighs buy orders, a ‘sell wall’ is formed. This signifies weaker demand in comparison to supply at that specific price level.

The market depth chart reveals a big buy wall and a much smaller sell wall, hinting that the demand is strong while the direction of least resistance lies in an upward movement. For traders, this makes it easier to identify potential areas for price rebounds and rejections when interpreted as “walls”.

It is important to remember that buy and sell walls should not be the only source of information used to determine price movements. Orders can change quickly, making market conditions unpredictable at all times.

Furthermore, with their substantial capital, so-called “whale” traders can exploit the market to tilt it in their favour by either creating or removing massive walls of orders.

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