BTC - THROUGH THE EYES OF THE MARKET MAKER VI - 5500 OR 10K

٢٢ مايو ٢٠١٩

BTC is such a small asset in the scheme of things that it's prone to a certain type of manipulation.

All assets are manipulated. BTC has it's own patterns which it follows. Today, we will assess BTC from 2 different angles:

1) A fractal View

2) A Market Maker View (via open interest)

While I find 2) much more relevant, I will start with 1) as this is quick to explain and equally as fascinating.

FRACTAL VIEW

As per the chart below, we see a similar run up last Summer from 6K to 8500 area. The price action from the beginning to end has too many similarities to ignore. Note the 1) parabolic run, 2) the peak with the descending trendline, 3) the Bart head down and back up to the prior path, and the 4) test candle down before the drop. We will see in the current chart




MARKET MAKER THEORY:

This meteoric run up was fraught with signs of manipulation. a 100% rise from 4K to 8+K with no retrace/retest is very suspect of unnatural market movement. We also know that many people exited USDT last couple weeks and hedged into BTC, which would account for not only the run on BTC but also the BTC premium on Bitfinex. At times, BTC was 400 more USDT on Bitfinex as compared to USD markets on other exchanges. That disparity has since diminished nearly completely, signaling that the exodus is over in any magnitude.

We see price being held up at the high 7K level/low 8K level. I've been watching the order books and noticing that each attempt to test lower levels is met with spoof orders and other algo games. This tells me that the market makers want to scare retail into FOMOing upward. The concern is that the upper limit of these moves is consistently falling, showing that these unwitting bulls are losing ground. Retain is running out of gas and the MM can't scare them any more. Why would they be doing this?

The MM are likely scaring retail bulls into buying upward so the MM can exit their longs and fill up on their shorts before a fall downward. If the retail bulls are running out of dry powder, this would explain why the wicks up are decreasing at a consistent basis. There is also an overall drop in volume as this happens, also indicating the lack of money velocity. The MM machinations and chicanery do require capital. If the would be retail bulls are decreasing, then there is a marginal rate of return on these pushes upward. At some point, the MM will make a choice to move price up OR down.

As per the open interest, we can see that the bears are slowly increasing shorts over the last 7 days while the bulls are erratic. This tells me that the bears are likley the smart money while the bulls are emotional traders. See chart below:



CONCLUSION:

So which way will price go? I see price moving either to 9900 or to 5500 area based on 2 scenarios.

1) My most likley scenario: 5500 area: MM are filling their shorts and going to push price down as soon as they find it profitable enough.

2) Second most likely scenario: 9900: The MM may try to get one more round of FOMO out of retail pushing (as one of my buddies recently said) children and institutionals to buy in. Once their shorts are filled, they can drop the price to wherever they see fit.

There is also a vague possibility that MM will let the price range around 6500 to 7500 area to try to get some more market participants interested. The extreme factor of the recent run has me not confident in this scenario as I think retail is exhausted.


Disclaimer:

***Any information represented here is my opinion only and not intended to be used for financial gain. None of the information posted here is to be considered financial advice. Information posted here is strictly for entertainment purposes only. Please consult your financial professional before making any kind of investment. Investments can be very risky and any investor should educate themselves before investing by enlisting the help of a licensed financial professional. Past results are not indicative of future results in any construable way.***