Is it the main force to absorb funds if the price opens low and goes high the next day after the daily limit, but the volume shrinks?

After hitting a daily limit, a crypto's price may rebound sharply with low volume, signaling potential accumulation by large investors.

Jun 28, 2025 at 06:14 am

Understanding the Daily Limit in Cryptocurrency Trading

In cryptocurrency markets, a daily limit refers to the maximum price movement allowed for an asset within a 24-hour period. This mechanism is commonly implemented by exchanges to prevent excessive volatility and protect traders from sudden, drastic price swings. When a coin or token hits its daily limit—either up or down—trading may be temporarily halted, or orders may only be executed at the capped price until the next trading session begins.

For instance, if a cryptocurrency has a 10% daily limit, its price cannot rise more than 10% or fall below 10% of the previous day's closing price. While this rule helps stabilize markets, it also introduces unique dynamics when the price resumes trading the next day, especially if there’s a notable shift in direction with reduced volume.

What Happens When Price Opens Low but Rises the Next Day?

After hitting a daily limit, particularly a downward one, the market may experience a low opening the following day. However, if the price then starts rising significantly, it raises questions about the underlying forces driving this movement. A common query among traders is whether such a scenario indicates that the main force (large investors or institutional players) is absorbing funds or manipulating the market.

This situation typically unfolds when panic selling pushes the price to hit the lower daily limit, causing a temporary freeze or restricted trading. Once the market reopens, buyers—especially large ones—may step in aggressively to accumulate assets at discounted prices. If the price rebounds sharply while trading volume remains low, it might suggest that these major players are purchasing without needing to move large amounts of volume to push the price up.

Why Volume Shrinks During This Type of Movement

When the price opens low and climbs back up the next day after hitting a daily limit, the accompanying volume shrinkage can be misleading. In traditional markets, higher prices usually correlate with increased volume. But in this context, the reduced volume often points to limited participation from retail traders and small investors.

The shrinking volume implies that only a few hands are responsible for the upward price action. This could mean that whales or institutional entities are quietly accumulating positions without drawing too much attention. Since they operate with large capital, they don’t need to trade massive volumes to influence the price significantly, especially in smaller-cap cryptocurrencies where liquidity is thinner.

How to Identify Whether Main Force Is Involved

Identifying whether the main force is behind such movements requires careful analysis. Here are some steps to consider:

• Check Order Book Depth: Look at the order book on platforms like Binance, KuCoin, or Kraken. Large buy walls forming at specific price levels may indicate institutional interest.
• Monitor On-Chain Data: Tools like Glassnode or Santiment provide insights into whale activity, exchange inflows/outflows, and accumulation patterns.
• Analyze Trade Sizes: Use blockchain explorers or exchange-specific tools to see if unusually large trades are being executed just above the daily limit floor.
• Compare Volume vs. Previous Sessions: If volume drops dramatically during the rebound but the price still moves up strongly, it suggests fewer participants but powerful buyers.
• Observe Time-Price Activity Charts: These charts show how price changes over time independent of volume, helping detect abnormal buying behavior.

By combining these methods, traders can better assess whether the recovery after a daily limit event is driven by smart money or just random market noise.

Technical Indicators That Help Interpret This Scenario

To further decode what’s happening behind the scenes, several technical indicators can be useful:

• Volume Profile Visible Range (VPVR): Helps visualize where most trading activity occurred during the limit period and afterward.
• On-Balance Volume (OBV): Tracks cumulative volume flow. A rising OBV despite falling prices may signal accumulation.
• Relative Strength Index (RSI): If RSI shows divergence—price making new lows but RSI not confirming—it could indicate hidden buying pressure.
• Order Flow Analysis: Platforms like Bitsgap or SmartTrade offer advanced tools to track real-time order execution, helping spot large-volume trades masked as smaller ones.

These tools assist in distinguishing between genuine market strength and artificial manipulation, especially when used alongside on-chain analytics.

Implications for Retail Traders and Investors

Retail traders must approach such scenarios cautiously. When the price opens low and rises with shrinking volume post-daily limit, it may appear like a reversal opportunity. However, entering without understanding who is behind the move can lead to losses. The main force often manipulates sentiment by triggering stop-losses or FOMO (fear of missing out) before continuing their strategy.

If you observe strong support levels forming near the daily limit floor and the price quickly rebounds without significant volume, it’s wise to wait for confirmation from broader market participation. Otherwise, you risk getting caught in a trap zone set by larger players who have already positioned themselves.

Frequently Asked Questions

Q: Can a cryptocurrency break its daily limit?

A: Most exchanges enforce strict daily limits. However, some decentralized exchanges (DEXs) or less regulated platforms may allow free-floating prices, which could theoretically exceed daily limits.

Q: How do whales manipulate volume and price simultaneously?

A: Whales can place large orders slightly off-market to create fake depth or execute wash trades to simulate volume while actually controlling both sides of the trade.

Q: Should I follow the main force after seeing this pattern?

A: It’s risky unless you can confirm accumulation through reliable data sources. Jumping in too early may result in being shaken out by volatility or false signals.

Q: Are daily limits common across all crypto exchanges?

A: No, daily limits vary widely. Major centralized exchanges like Binance or Coinbase rarely use them, while smaller or regional exchanges, especially in Asia, may implement them more frequently.