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The Bitcoin's Big Trend Is Coming

Updated: Apr 5, 2019


Abstract This article will offer you an overview of the current crypto market and the incoming trend. Also, a very simple price action strategy will be mentioned in the end as a bonus.



In order to have a better understanding of the whole picture, I have to start with the I. Fundamental knowledge of the market (any market). However, you can actually start with II. Market cycle overview, if you are already familiar with the market structure.



I. Fundamental knowledge


In this section, I will share with you some critical fundamental knowledge of how the whales view and move the market. Remember, the market is carried out by the composition of institutional whales, isolated whales, weak hands and retailers. In order not to have a bias or ignorant understanding, we should be well informed.


First of all, we need to understand the basic rules of how market was moved by the market makers (Big Whales) in 7 critical steps based on Ooolong's "Game of deceive".


A. Position Building


According to Wolong, "There are multiple ways to build a position. This is the stage where we will require a significant amount of market share to do pumps. The most common method will be micro buys. Through placing of buy order in relatively small amounts, it avoids driving up prices and also masked our existence. Some alternate coins, however, has really low amount of volume, and it will take ages to build up our position through micro buys. In such cases, we will be force to do a pump up, to encourage sellers. Pump waves will be gradually decreasing, smaller and smaller, forcing out all sellers so that we can have what we want - market share. This has happened many times infact to date, such as Doge/BTC, UNO/BTC, Dev/BTC and GLC/BTC" [1].


B. Suppressing prices

According to Wolong, "Contradicting isn't it? That we are willing to pump altcoins up a few times of it's value worth before driving down it prices. And yes, like I have stated earlier on, prices does not matter to us as long we can sell higher. However, like every other business on the industry, everyone would want their costs to be as low as possible. In this very stage, we will pile up whatever we have bought, to suppress prices as much as possible through sell walls so that we are able to do our buying cheap. Our sell walls are usually just enough to appear as though as it's the invisble hands of the market, minor supply over demand" [1].


C. Test Pump


According to OooLong, "Before a real pump happens, whales like us tends to test the market. Why? Reason is simple. It is to ensure that we have absolute control of the market. Test pump, like shakeouts, actual pumps, re-allocation and distribution, happens many time throughout the pump and dump process. By doing a test pump, we will roughly get an idea on where our next resistance will be and how much floating chips are around (Floating chips refers to weak hands). Whales hate weak hands, they do not act as any form of support for us during a pump, and we will are always determine to get rid of them in the early stages, no matter how long it takes" [1].


D. Actual Pump


According to Ooolong, "The term pretty much explains everything. When weak hands are being forced out, and we have gain the market share that we expect, we are ready to move" [1].


E. Shakeouts


According to Ooolong, "Shakeout is a deliberately forced price reaction, whose purpose is that of stimulating public selling in order to facilitate the accumulation of speculative positions. This is the most aggressive part in wiping out weak hands of their positions. Sometimes during a shakeout, we can be so aggressive that we drive prices so low that's it's way below our cost price. Losses does not matter to us, it is only on paper, and we have enough bankroll to pump prices back up. Individuals who have no experienced or unable to withstand such psychological torture will usually exit the market at this stage" [1].


F. Re-allocation and distribution


According to Ooolong, "Re-allocation and distribution usually serves the purpose for us to re-balance our portfolio. In a test pump, we might distribute you some of our shares (coins). The logic is quite simple, sometimes during a pump, buying into our own walls and others, we bought more than expected. We will have to release a few back to the individual traders. At times, it serves as a support, and reduce our risk exposure or being a "safe trap". What do I mean by that? For example if you were to distribute you at $5 and then we were to drive prices back down to $4.50, we will know that the total amount of shares being distributed at $5 will not be selling at $5. Traders tends to exit when in profit and are unlikely to exit with break even costs. I used the word "safe" is because, this is not the part where we will be dumping. There are a lot of re-allocation and distribution, like shuffling a pack of cards throughout the entire process, and prices tend to go much higher than the price that you are "trapped" at" [1].


G. Exiting - The Dump


According to Ooolong, "This is usually the last stage. The part where we take our profits and completely exiting the market. There are many exit strategies available to us. I will be revealing some of it and explain. The most common mindset everyone had is that we either micro sell or massively dump into buy walls during a dump. Theses are just the basic. Usually by exiting via this method, gives us really a bad price to sell at. One of the exotic methods we used : "Exit during a pump". This works by having sell walls in place, and buying into our own walls again and again aggressively until the crowd follows. Once they follow, they will be biting into our walls. Hence we are able to exit portions of it, bits by bits, rinse and repeat a few times, we will be able to exit the market completely. Another method is known as "Exit by putting a sell wall". Well, many of you who follows my trades on #dogecoin-market, knows that I like having sell walls up to suppress prices and buy doges cheap. However, I am able to imply this strategy by deceiving everyone into thinking that I am merely capping prices but the fact is, I am micro selling my way out" [1].



Secondly, we need to figure out why and how the whales perform accumulation and distribution according to Wyckoff [2].


"Wyckoff's chart-based methodology rests on three fundamental “laws” that affect many aspects of analysis. These include determining the market's and individual stocks' current and potential future directional bias, selecting the best stocks to trade long or short, identifying the readiness of a stock to leave a trading range and projecting price targets in a trend from a stock’s behavior in a trading range. These laws inform the analysis of every chart and the selection of every stock to trade.



A. The law of supply and demand


It determines the price direction. This principle is central to Wyckoff's method of trading and investing. When demand is greater than supply, prices rise, and when supply is greater than demand, prices fall. The trader/analyst can study the balance between supply and demand by comparing price and volume bars over time. This law is deceptively simple, but learning to accurately evaluate supply and demand on bar charts, as well as understanding the implications of supply and demand patterns, takes considerable practice.



B. The law of cause and effect


It helps the trader and investor set price objectives by gauging the potential extent of a trend emerging from a trading range. Wyckoff's “cause” can be measured by the horizontal point count in a Point and Figure chart, while the “effect” is the distance price moves corresponding to the point count. This law's operation can be seen as the force of accumulation or distribution within a trading range, as well as how this force works itself out in a subsequent trend or movement up or down. Point and Figure chart counts are used to measure a cause and project the extent of its effect. (See “Point and Figure Count Guide” below for an illustration of this law.)



C. The law of effort versus result


It provides an early warning of a possible change in trend in the near future. Divergences between volume and price often signal a change in the direction of a price trend. For example, when there are several high-volume (large effort) but narrow-range price bars after a substantial rally, with the price failing to make a new high (little or no result), this suggests that big interests are unloading shares in anticipation of a change in trend" [2].




II. Market cycle overview


A. The cycle


Like any other markets, such as stocks (equity), bonds, forex, derivatives, and physical assets, bitcoin has an undeniable cycle that has been seen, performed and carried out over and over again.


1. The very first cycle we need to reveal is the halving main cycle.


a. What is bitcoin halving?


  • New bitcoins are issued by the Bitcoin network every 10 minutes. For the first four years of Bitcoin's existence, the number of new bitcoins issued every 10 minutes was 50. Every four years, this number is cut in half. The day the amount of halves is called a "halving".


b. Why is it important to bitcoin price?

  • Halving means the decrease of supply, according to I. Wyckoff's method, the market price is and always will be determined by the demand and supply, and it will always revisit the balance point of demand and supply. The decrease in supply will suddenly raise the balance point to a higher level. In order words, it will reach a much higher price in the future as a result.


c. The halving cycle chart

  • As the chart reveals, the 3rd halving will happen at around May 20, 2020. Which means that the bottom should occur during the Q3-Q4 2019.



2. The second cycle we need to reveal is the MexShark indicator main cycle.


a. What is MexShark indicator?

  • MexShark is a free and public indicator published on tradingview. Its data source is from the asset's market open, close, high and low. The concept is based on the distribution's probability. We assumed that the market is distributed in a bell shape and not a fat tail shape. The more we study, the more evidence is showing that the market is a bell shape distribution in the long term and midterm cycle. So, we applied the probability magic in there. Then, we smoothed it out and created the MexShark.


b. Why MexShark is reliable?


  • The reliability comes from the reliable of the model. As we mentioned above, this indicator is being created base on the study of the market cycle and scatter probability.



  • I invented the MexShark to reveal the macro and micro reversal point, and it works extremely well for my tradings. Currently, it's indicating that we're in the long term bottom, whose range can vary from 2.6k to 4k. Considering the 2nd deviation standard variety according to empirical rule, I have 93% confidence to call this range as the bottom consolidation range for the main cycle.



  • Also, another possible scenario is that we will go to 1.8k area. In this case, we have almost 99.9997% confidence to call it bottom.

2011-2019

For both cases, we can come to a very simple conclusion. That is, we're currently in consolidation mode and highly possible that this is the starting of a huge accumulation from 4k to 3.2k or 4k to the lowest 1.8k. In these cases, we will see long term traders jumping in very soon.




III. The incoming big trend


In this session, I am going to dig into the microstructure and explain more about the whales' consolidation tricks. First of all, we need to illustrate the tensorcharts. It has a very useful function that helps us track the walls.

Purely using these walls in the 4 hours time frame can always help us find good entries and exits. Today we're not going to talk about how to scalp these walls, but reveal the motivation behind them. Let's look at the bigger picture (from the 6k dump to the 3k).


6K-3K



6K Macro

6k Micro

5k-3k

3k-4k Macro

3k-4k Micro

3k-4k Micro


3k-4k Micro

Clearly, from these screenshots, we can find a very critical pattern. The market on 6k range and 3k-4k range has walls above the price and below the price closely, but none of them existed during the 6k-3k dump. What does it mean? And why are the whales doing this? Obviously these walls are not built by retailers.


The answer is consolidation, spread accumulation and distribution on both sides. When the market entered the comfort zone, no one wanted to drive it to the higher or lower range, so the whales were trying their best to put more enough longs at the range bottom, and more enough shorts on the higher range. As we can see in this chart,

the total volume is increasing, which means that people's trading interests are more than 6k! Be aware! If the 6k consolidation has led to a massive dump. What will a bigger consolidation cause? The answer is simple, a bigger rapid movement is coming.

Before we dig into the details, let us look back to the tensorcharts to see what they are telling us. The same story! Walls on both sides to help the whales load both shorts on high 4k and longs at low 3k. In the end, those whales will use these liquid bombs to blast one side, causing another formidable run. Considering the amount of the consolidation volume and the events happening in front of us, I've started loading my longs in the last 2 months around 3.2k->3.6k. Also some shorts on the 4k, in case of a breakdown. And I am looking for a revisit of 6k, or a break down to the 2k in the next 2 months.


In the long term perspective, I have a very confident expectation about bitcoin's future, especially thanks to the U.S. dollars is going to be weaker under Federal Reserve's QE plans and the shift of history pace. Though, I should state clearly here that the bitcoin has not been considered to be the digital gold yet. Why? because the data is clearly showing that bitcoin has 0.69 correlated coefficient with Nasdaq and only 0.17 correlated coefficient with gold. Which means that we need a strong world economy to support the next bitcoin surge. Hence, on the bigger picture, we're happy to see the negotiation between China and the US going well. Also, Great Britain making their deals with Europe will also boost the bitcoin price. In the next section, I will talk about something relevant to the recent price action.



IV. Price action

As we all know, both whales and retailers are using EMA to make their choice to enter and exit the market. Let's take a look at what we can find from the main trend. I am going to use my rainbow ribbon to help us play this trick.


A. Three days price action

In this chart we can come to a very simple but practical long term buy and hold strategy:

  1. Long and hold when the price breaks up and bounces on the ribbon for the second retest. Exit when the second condition is satisfied.

  2. Short and hold when the price breaks down and is rejected on the ribbon for the second retest. Exit when the first condition is satisfied.




B. Daily price action

In this chart, we can not only perform the cross and trade trick but also predict the break out the direction of the consolidation. Interesting!


C. 4 hours price action

The same tricks still work here; despite some false signals, it is generally acceptable because of the huge profit behind these trades.


In conclusion, this EMA price action only works in trending market, which means that if there is an event or some goals for the crows to chase, then it will work like a charm. Also, the bigger time frames the better is the performance, because you can ignore the stop loss hunting of the naughty whales.




V. Conclusion


As you can see, we're currently in the final phase of a giant consolidation, either ride the trend after the breakout, or hold your longs below 3.4k and shorts above 4k then close one side. This will be the best strategy for long term traders. I am not giving you any trading advice, but the analysis and study of this market. The motivation for me to do this is the pleasure of thinking. I am a thinker instead of a gambler.


Happy trading to everyone.








Work Cited


[1] Ooolong. “Game of Deceive.” Cryptofrenzy, 16 Feb. 2014, cryptofrenzy.files.wordpress.com/2014/02/god.pdf. Accessed date 22, Mar. 2019.



[2] Wyckoff. “The Wyckoff Method: A Tutorial.” The Wyckoff Method: A Tutorial [ChartSchool], 21 Mar. 2019, stockcharts.com/school/doku.php?id=chart_school:market_analysis:the_wyckoff_method. Accessed date 22, Mar. 2019.


[3] Clock, Bitcoin. “Bitcoin Clock: 2020 Bitcoin Halving Countdown.” Bitcoin Halving 2020 Countdown & Date ETA (Bitcoin Clock), www.bitcoinclock.com/. Accessed date 22, Mar.2019.




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