Through the Eyes of the Market Maker V: Bears getting tired?
In this report, we will discuss price ranges and forecasts, my general positioning, open interest, and market maker theory. Remember, none of what I say in here is investment advice. Risking money in markets is dangerous and can result in financial loss. Consult your licensed financial professional before making any trades/investments.
Price movement/range/forecast:
BTC has recently seen a nice pump to the mid 5K range. 5800 is the major mid term resistance on the minds of most people in the market and 6K is the psychological resistance and number to cross for retail sentiment.
As per my chart I see the most likely scenario to be a run to 5800 and then a fall to low 4K range. We may also fall to low/mid 4K range to accumulate before a run. ALSO: the MM may still want to push price down below 4K, so we may be in the middle of a distribution. However, the more time we spend above 4K, the more I think we will not revisit the 3K zone. HISTORICALLY, however, BTC does like to revisit it's bottom before running up. What is DIFFERENT than history is the fundamentals behind BTC with much more media attention. I will also refer to my chart later in this article with regard to open interest.
General Positioning:
Full disclosure: Since a fall below 4K is still reasonable and possible, I am slowly re entering the crypto market mostly taking small risks in alts. When we first went to 3K, I did switch to BTC as my base currency (instead of USD) and was a bit more aggressive. Since we are approaching what I believe to be a key resistance, I am now being much more conservative. If we break above 6K and become much more bullish OR if we fall to low 3K range again, I will likely become more aggressive.
Open Interest:
First I will look at open interest from a crypto-centric perspective: Bitfinex. Next, we will review IG Client Sentiment from www.dailyfx.com for a wider market perspective. Citation for IG Client Sentiment will be provided at the end of this report.
Bitfinex Long:Short ratio is Long 55%:Short 45%. I usually take a contrarian point of view in that the Market Makers will look for the largest liquidity pool to fill their bags. However, I am actually leaning towards a short term bullish stance. Much of the space is bullish and thinks we will hit 5800. The TREND for shorts is rising 3.3 times faster than that of the longs (see longs/shorts chart). This tells me MM know that as they raise price, shorts will increase. Also, we are in uncharted territory, so shorts are most likely at 5400 area and stops are not far above that. This tells me that the bears' liquidity pool is likely concentrated just above 5400 and would make nice fuel for the MM to push to 5800. The liquidity pool for the bulls, however, is most likley spread between 5400 and 5800 and the trend is not as robust. This means that despite the longs being 10% more than shorts, the stops/liquidations between 5400 and 5800 are nearly half the potency and thereby much less useful for MM to use. This leads me to believe that it's far more profitable for MM to push long and take profit around 5800 where the long term/key resistance begins. (See chart below)
Daily FX's IG Client Sentiment Analysis (citation at end of article):
IG Client sentiment from Daily FX is ver notable. Historically in this bear market, IG client sentiment views retail Long dominance in with a contrarian lens in that it's a good indicator for a bearish move. They have been pretty accurate in my opinion. in my prior Through the Eyes of the Market Maker reports, IG client sentiment being mixed while Longs are dominant has yielded a decent probability of a rise. In this case, they are actually bullish as per the following quote from their website:
"We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long."
Conclusion:
I feel we will most likely head to 5800-6000 range before we head to or below 4K area. Neither direction will likley happen in a straight line. However, BTC is known for wild swings, so a relatively direct route could be in the cards.
Citation:
www.dailyfx.com/sentiment
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.***
Price movement/range/forecast:
BTC has recently seen a nice pump to the mid 5K range. 5800 is the major mid term resistance on the minds of most people in the market and 6K is the psychological resistance and number to cross for retail sentiment.
As per my chart I see the most likely scenario to be a run to 5800 and then a fall to low 4K range. We may also fall to low/mid 4K range to accumulate before a run. ALSO: the MM may still want to push price down below 4K, so we may be in the middle of a distribution. However, the more time we spend above 4K, the more I think we will not revisit the 3K zone. HISTORICALLY, however, BTC does like to revisit it's bottom before running up. What is DIFFERENT than history is the fundamentals behind BTC with much more media attention. I will also refer to my chart later in this article with regard to open interest.
General Positioning:
Full disclosure: Since a fall below 4K is still reasonable and possible, I am slowly re entering the crypto market mostly taking small risks in alts. When we first went to 3K, I did switch to BTC as my base currency (instead of USD) and was a bit more aggressive. Since we are approaching what I believe to be a key resistance, I am now being much more conservative. If we break above 6K and become much more bullish OR if we fall to low 3K range again, I will likely become more aggressive.
Open Interest:
First I will look at open interest from a crypto-centric perspective: Bitfinex. Next, we will review IG Client Sentiment from www.dailyfx.com for a wider market perspective. Citation for IG Client Sentiment will be provided at the end of this report.
Bitfinex Long:Short ratio is Long 55%:Short 45%. I usually take a contrarian point of view in that the Market Makers will look for the largest liquidity pool to fill their bags. However, I am actually leaning towards a short term bullish stance. Much of the space is bullish and thinks we will hit 5800. The TREND for shorts is rising 3.3 times faster than that of the longs (see longs/shorts chart). This tells me MM know that as they raise price, shorts will increase. Also, we are in uncharted territory, so shorts are most likely at 5400 area and stops are not far above that. This tells me that the bears' liquidity pool is likely concentrated just above 5400 and would make nice fuel for the MM to push to 5800. The liquidity pool for the bulls, however, is most likley spread between 5400 and 5800 and the trend is not as robust. This means that despite the longs being 10% more than shorts, the stops/liquidations between 5400 and 5800 are nearly half the potency and thereby much less useful for MM to use. This leads me to believe that it's far more profitable for MM to push long and take profit around 5800 where the long term/key resistance begins. (See chart below)
Daily FX's IG Client Sentiment Analysis (citation at end of article):
IG Client sentiment from Daily FX is ver notable. Historically in this bear market, IG client sentiment views retail Long dominance in with a contrarian lens in that it's a good indicator for a bearish move. They have been pretty accurate in my opinion. in my prior Through the Eyes of the Market Maker reports, IG client sentiment being mixed while Longs are dominant has yielded a decent probability of a rise. In this case, they are actually bullish as per the following quote from their website:
"We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long."
Conclusion:
I feel we will most likely head to 5800-6000 range before we head to or below 4K area. Neither direction will likley happen in a straight line. However, BTC is known for wild swings, so a relatively direct route could be in the cards.
Citation:
www.dailyfx.com/sentiment
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.***