What are buy and sell walls in crypto, and how can one identify them?
In cryptocurrency trading, a “buy wall” is a massive buy order, or multiple buy orders, around a particular price level. Conversely, a “sell wall” is a significant accumulation of sell orders at a given price level.
Before understanding how buy and sell walls work, it is important to know what an order book and its market depth are.
An “order book” is an index listing buy and sell orders for a specific cryptocurrency based on price levels. A trade is executed when the orders on either side meet at a certain price level, establishing the cryptocurrency’s price as supply meets demand.
Nonetheless, these orders don’t get executed randomly — rather, the market fulfills them in the order of their sequence.
For example, two open orders are created when Peter Griffin attempts to sell 1 Bitcoin (BTC) for $25,000 and Cleveland Brown places an order to buy 1 BTC at $24,000. Suppose Glenn Quagmire 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, Joe Swanson, enters the market and tries to buy 1 BTC for $26,000, he does not get Quagmire’s coin. Instead, he receives Griffin’s BTC for $25,000, and the Bitcoin spot price becomes $25,000.
Meanwhile, Brown’s and Quagmire’s orders will remain open.
The open orders are packed together as buy and sell orders and pitted against one another on a market depth chart.
The X-axis on the graph represents the bid (buy orders in green) and the ask (sell orders in red) price, while the Y-axis represents the cumulative market volume.
A large spike sloping upward on the market depth chart’s either side is called a “wall.” These walls appear as deeper vertical lines resembling the side angle of a staircase, as seen in the example above.
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