What the crypto market just witnessed was a near texbook definition Wyckoff Distribution play. I've explained it below.
Before I begin
- Elon Musk did not cause this
- China FUD is not new
- The fundamentals and milestones that Bitcoin has met these last few months have not changed
Disclaimer: I entered positions in both the BTC and Alt Market. However, keep in mind the Bitcoin Dominance. As it rises, we may see alts lose some satoshi value.
- Phase A: This phase means that the uptrend is slowing down or stopping. As investors who accumulated earlier sell (Distribute) their positions (PSY), an increase in supply hits the retail market. Retail investors, who are late, will buy the recently sold positions ( BC ). Both events occurring will have the (AR) as the sell-off is bought “Buy the Dip”. at this point is diminishing and we see a retest of the ( BC ).
Phase B: Phase B is when the market is being set up for the downtrend. Traditionally, institutions and market makers at this point begin distributing (selling) their positions over a period of time to exhaust the buyers. Additionally, they begin entering short positions.
Phase C: Here the market is led into a bull trap with resistance being broken on low . Here we can see common patterns such as the “Double Top, etc). This is when short positions are loaded.
Phase D: The bears gain with small short-lived rallys countering their price action. These are perfect opportunities to enter or add to your short position.
Phase E: This is the downtrend and as long positions are liquidated, the probability of short sellers closing increases and set trailing stops. Climactic action may happen and then we may see a signal of the reverse. Accumulation
PSY (Preliminary Supply): Market makers start to sell after an upmove
BC (Buying Climax): Retail investors flood in buying up the sold positions due to hype
AR (Automatic Reaction): Momentum has slowed and sets up the low boundary
ST (Secondary Test): Price revisits the area of the BC to test demand.
SOW (Sign of Weakness): Supply is dominant with bear increasing as it nears support
LPSY (Last Point of Supply): After testing support, a short rally that breaks up or down is determined by the . (A may appear on the chart patterns).
UTAD (Upthrust after Distribution): Tests new demand after a breakout in resistance. It’s not a required structural element.