bearish until proven otherwise/theory of the descending triangle
What's up everyone,
I hope the bear market hasn't been too rough on you all. I've been using this time to do more research into bitcoin and build trading infrastructure for the future.
I wanted to write today that I am expecting more downside from this point, but I strongly believe we will bottom this year. Volatility has been decreasing in this range, and because of the trend, the break in volatility is likely to the downside.
I want to talk about my opinion of volatility. I've heard opinions from people I respect who say that supply/demand are totally different from support resistance, but I am more inclined to say they are about the same thing than to say they are completely unrelated.
Specifically, I want to talk about how I interpret the low volatility now. My main assumption is this: demand for a coin is based on price and not time for the medium term and that all the demand that will exist at that price exists at the start of the interval (medium term because fundamentals change slowly, and people's real appreciation of them changing is even slower). What does this mean? Well, say the price is in the $3,000 range (*like now*) based on my models, I think it's a good range to buy so I place orders in this range. Let's say my orders represent all of the demand at the floor of the level.
If the price rises above the floor, it is due to other market participants buying. Now, if the volatility shrinks, what does that imply, it implies less people other than myself are buying and the sellers remain constant (in proportion to eachother) or it means there are equal buyers, but more sellers. Either way, the price fluctuates less because the demand can't force the price to move upward (in this specific case to the market now - obviously in different patterns the scenario is different). So what happens?
Sooner or later, my orders which are at the floor of the range will be filled and thus price will break below it and volatility will therefore increase.
This idea more or less is the idea behind why descending triangles are bearish and why the reverse are bullish - at least, this is why I think they are. In my opinion, they are more indicative the higher the timeframe (a triangle on small tf won't trade as easily as on htf).
Hope this helps,
-YoungShkreli
I hope the bear market hasn't been too rough on you all. I've been using this time to do more research into bitcoin and build trading infrastructure for the future.
I wanted to write today that I am expecting more downside from this point, but I strongly believe we will bottom this year. Volatility has been decreasing in this range, and because of the trend, the break in volatility is likely to the downside.
I want to talk about my opinion of volatility. I've heard opinions from people I respect who say that supply/demand are totally different from support resistance, but I am more inclined to say they are about the same thing than to say they are completely unrelated.
Specifically, I want to talk about how I interpret the low volatility now. My main assumption is this: demand for a coin is based on price and not time for the medium term and that all the demand that will exist at that price exists at the start of the interval (medium term because fundamentals change slowly, and people's real appreciation of them changing is even slower). What does this mean? Well, say the price is in the $3,000 range (*like now*) based on my models, I think it's a good range to buy so I place orders in this range. Let's say my orders represent all of the demand at the floor of the level.
If the price rises above the floor, it is due to other market participants buying. Now, if the volatility shrinks, what does that imply, it implies less people other than myself are buying and the sellers remain constant (in proportion to eachother) or it means there are equal buyers, but more sellers. Either way, the price fluctuates less because the demand can't force the price to move upward (in this specific case to the market now - obviously in different patterns the scenario is different). So what happens?
Sooner or later, my orders which are at the floor of the range will be filled and thus price will break below it and volatility will therefore increase.
This idea more or less is the idea behind why descending triangles are bearish and why the reverse are bullish - at least, this is why I think they are. In my opinion, they are more indicative the higher the timeframe (a triangle on small tf won't trade as easily as on htf).
Hope this helps,
-YoungShkreli