First, here's a static picture of the chart we'll be discussing.
Something I do very often is get lost in the charts, comparing old data to new, recycling old methods and even memeing like the Wall Street Cheat Sheet based off psychology.
Today, I decided instead of overlaying the two like I would usually do, was to just re create it. With some simple, yet effective to understand why each of those points are labelled what they are.
After diving into it, The following is very clear:
1) That this is only a possibility, it's a simple interpretation of a chart that is based off psychology. We could still be at any given point of this chart on the grand scheme of things. I've picked this time zone based off when $BTC/$USDT pairing became available on Binance.
2) That simple lined up with emotion, made much more sense as to why the traders at the time would feel the emotions that they did.
3) That the general feeling in the market right now is that of a possible disbelief, which would mean the bottom may well just be in based off a psychological point of the market
Let's zoom into each of these points and understand them more.
On the way up..
Disbelief, after finally rallying ~ a formed and completed, sending price dropping quickly. buyers quickly jumped in and a healthy double bottom/adam and eve pattern followed.. leaving a nice big wick on the bigger time frames. After forming another small and dropping, buyers quickly stepped in at support, and price sky rocketed in Disbelief. See image here:
Hope, after breaching above the previous high, price found a top just shy of a round number and then proceeded to form a successful bullflag.when sent price back up, which then formed a healthy double bottom/adam and eve pattern, which then found support above previous resistance and sky rocketed again. Once buyers were exhausted, another pattern completed sending price sky diving quickly. Traders had Hope that support would hold and the rally could continue, support was held and price bounced very quickly. See image here:
Optimism, After finding a local top, price created yet another bullflag, sending price higher creating a new high. Once found, price started to form an and completed it, sending price sky rocketing once again. Another local top was found, and a bullflag was painted, however it was a very erratic one, big movements within each candle, yet it was successful and price jumped yet again breaching the previous high. Once above, it failed to stay above and sharp sent price down quickly, but buyers stepped in and kept the candle body higher than the previous high's candle body, giving great Optimism for traders. Once price was back above the high, and found support, price again, sky rocketed. See image here:
Thrill, After buyers were exhausted, a volatile sell off happened, which recovered and became yet another bullflag that completed. Once price reached the previous high, it formed another bullflag completed, found support above resistance, which would have sent a Thrill down bulls spines as their investment was now heading completely parabolic. See image here:
Euphoria, The parabolic curved reached it's peak, everyone was in a state of Euphoria but most were blinded by greed. See image here:
On the way back down..
Complacency, A higher high and low were finally reached. The brutal sell offs had finally stopped. Support will hold.. right? The majority were in a state of Complacency. See image here:
Anxiety, After forming the higher high and higher low, we're struggling to get back above the first support we failed, What do I do now? What is going to happen? Am I going to make a mistake? What if price rockets after I sell? What if I don't sell and price drops. At this stage, the majority were feeling a lot of Anxiety. The that has been forming was looking to complete.. I had to convince someone I lived with at the time, it was finally time to sell before. He literally suffered from both FOMO and FONS at the same time.
Denial, Support just failed. Most stared at their portfolios in Denial that we were heading down much further yet. Supports failing one after another. The momentum was so great and swift that most did not know how what the right move was. Denial that they hadn't sold earlier at the clear signals to exit. And were failing to see what was playing out right infront of them, a , and two failed double bottoms / adam and eves. See image here:
Panic, Support failed, which turned resistance.. price can't seem to get back above.. but also won't drop below the current support.. a state of panic follows.. people began to Panic sell, and others were Panic buying thinking they were catching a falling knife chasing a dead cat bounce.. to only have price continue to drop past previous supports. See image here:
Capitulation, No supports held long, emotions are high.. words like ponzi, scam, manipulation etc were used to describe the market movements as some were coming to terms that they had been in Denial and did not want to lose further funds so they sold to save the last of their portfolios finally surrendering to Capitulation. Price dropped 40% in less than a week. See image here:
Anger, A dead cat bounce followed Capitulation. Climbing nearly 100% in exactly two weeks. It hit resistance hard but failed to get over, sending price back down, creating yet another / adam and eve and which failed and sent price diving. Once a local bottom was found, buyers in large appeared in April, there was buzz back in the market. Joe Perl and I assumed April would be a target/local/temporary bottom for Bitcoin based off a large descending that was also playing out. However, months went on, and lower highs kept forming and slightly higher lows also. Until a Death Cross on the 3 day chart seemed to be enough to throw us off the edge, sending us further down. Reaching $3,200USD. Price has since inclined and broken above long term trend descending resistance. See image here:
Depression, With very few people left in the market in comparison to the major bull run, most with wounds of massive losses in both loss of profit and loss of funds left the market. and still call it a ponzi, scam etc. Some suffering from deep Depression, and a few even taking their own lives who were highly over invested or apart of elaborate scams.. I believe we're currently going through this phase. sooner or later, we'll start to reach a state of disbelief. I feel we're getting to that point now with many calling the market bottom, and many thinking we're going to leg down again. See image here:
Once we reach Disbelief again, the cycle can start again. Just because we end a bear market though, does not mean we'll automatically resume a bull market.
Something a lot of traders need to learn is "Price vs Time". There is no schedule other than Bitcoin's halving that may change price. Everything else comes down to supply vs demand.
I hope breaking this meme psychology chart down shows you just how psychology, sentiment, technical and impacts the chart. But, regardless of the all the fundamentals.. The chart never lies.
Thanks for taking the time to read this.
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