Wanted to do a post mortem and identify the trends and patterns that illustrate the crash. As most pro traders I know say "price is king", oscillators are nice amplifying information but price action is the most reliable way to identify the coming move.
On 26 November BTCUSD sold off aggressively 10% in a few hours. Over the next 5 days it began to print a head and shoulders that failed to reach the previous high from the sell off on 26 November. It's possible that traders became overconfident due to the inverse bart that formed in late November. Also, on higher timeframes between the fractal trend and general bull market there was almost $1bn in long leverage in the market; always a recipe for a big smash.
All these conditions needed was some spark to light the tinder; COVID Omega Universal Megatron variant, Joe Biden had a cold, Evergrande news and the typical China FUD, "transitory" inflation fears due to the US dollar (the most unstable coin), and the fact that data indicates big markets correlate most of the time. (at least crypto and stocks - cryptonews.com/news/...h-gold-analysts.htm, caia.org/blog/2021/0...ming-more-correlated)
The crypto market has changed. It's no longer retail buyers, small traders, lucky early adopters with big twitter followings and Rolexes, etc. Big institutional money, family offices, billionaire investors and so forth have entered the game and move the market with huge risks in risk-on environments. Oil goes up, bonds go down, risk goes on, and leverage takes big swings at crypto.
What is helpful to note is the recovery pattern in the lower right (yellow). This is the same pattern that plays out nearly every time after these flash crashes, because whales are eating up the liquidations and buying discounts. That's why I never sell on panic days; I buy. Even for short term gains that's a possible strategy. In a higher time frame bull market it's your opportunity to buy discounts.
I use other data to tell where the general market is, which gave me the confidence to call this "transitory". On-chain data - Net Unrealized Profit and Loss (NUPL), Market Value Realized Value - Z (MVRV-Z), sentiment data (buy fear/sell greed), and the Stock 2 Flow model by PlanBTC@100TrillionUSD are a couple of the indicators. Granted none of these indicators are predictors of future performance, but I diversify my risk in other ways. Most of my assets are staked or farming in liquidity pools (95%). So I continue to build assets that yield returns, and those yields grow in bear markets in anticipation of the next market cycle.
On 26 November BTCUSD sold off aggressively 10% in a few hours. Over the next 5 days it began to print a head and shoulders that failed to reach the previous high from the sell off on 26 November. It's possible that traders became overconfident due to the inverse bart that formed in late November. Also, on higher timeframes between the fractal trend and general bull market there was almost $1bn in long leverage in the market; always a recipe for a big smash.
All these conditions needed was some spark to light the tinder; COVID Omega Universal Megatron variant, Joe Biden had a cold, Evergrande news and the typical China FUD, "transitory" inflation fears due to the US dollar (the most unstable coin), and the fact that data indicates big markets correlate most of the time. (at least crypto and stocks - cryptonews.com/news/...h-gold-analysts.htm, caia.org/blog/2021/0...ming-more-correlated)
The crypto market has changed. It's no longer retail buyers, small traders, lucky early adopters with big twitter followings and Rolexes, etc. Big institutional money, family offices, billionaire investors and so forth have entered the game and move the market with huge risks in risk-on environments. Oil goes up, bonds go down, risk goes on, and leverage takes big swings at crypto.
What is helpful to note is the recovery pattern in the lower right (yellow). This is the same pattern that plays out nearly every time after these flash crashes, because whales are eating up the liquidations and buying discounts. That's why I never sell on panic days; I buy. Even for short term gains that's a possible strategy. In a higher time frame bull market it's your opportunity to buy discounts.
I use other data to tell where the general market is, which gave me the confidence to call this "transitory". On-chain data - Net Unrealized Profit and Loss (NUPL), Market Value Realized Value - Z (MVRV-Z), sentiment data (buy fear/sell greed), and the Stock 2 Flow model by PlanBTC@100TrillionUSD are a couple of the indicators. Granted none of these indicators are predictors of future performance, but I diversify my risk in other ways. Most of my assets are staked or farming in liquidity pools (95%). So I continue to build assets that yield returns, and those yields grow in bear markets in anticipation of the next market cycle.
