Don't get psyched out by a robot!
Updated: Jul 3, 2021
27/6/2021 – By Dr.Sauce
I belong to many crypto groups and find them to be invaluable research tools. More eyes equals more awareness! The majority are private group threads, but a few weeks ago I joined Booyah Traders after seeing Sir Baller’s and Akin D Grace's invaluable Wyckoff trend analyses.
I tend to focus on different indicators than what has been discussed in recent Booyah Traders’ newsletters. A differing viewpoint benefits everybody.
A lot of people are concerned about current market dynamics and I will explain what I believe is happening.
We are seeing low volume trading across the board with mainly TWAP (“time weighted average price”) algorithms dominating the buying and selling action. I have fielded a few questions on the Booyah traders telegram channel about these algorithms. I am not an expert in forecasting short term price action, but I have been watching the effects of these algorithms and use a process of inference. We should assume that mainly whales use TWAP to purchase their positions at the best average price. A whale cannot purchase a large position without affecting the market price, so they use TWAP algorithms to spread out the buy and sell orders over time. This results in each purchase having less of an effect on the spot price. A further explanation of the TWAP can be found here.
TWAPs generally trade on 4hr candles and above. Where these candles close provide clues about what direction future candles will be. When reading Bitcoin charts in tradingview, I recommend turning on the setting “countdown to bar close” as this will show you a countdown timer to the close of the bar. TWAPS use price, volume and patterns to determine when to buy and sell. I see traders freak out prematurely when they see a big red candle on a 4hr chart with two hours left until close, only for it to reverse direction with 10 minutes left on the clock and close bullish!
Since the recent price dump, BTC/USD has been forming a “bullhorn” pattern. See the lines I’ve drawn on the chart below:
This pattern is not something usually seen on other coins dominated by manual or “live human” trading. It is evidence of whales testing the supply and demand limits of support and resistance via their TWAP algorithms.
On 22 June 2021 there was a big dip to about $28.8k. The large volume spike in the chart below shows that Bitcoin was immediately rebought by whales.
In my humble opinion, TWAP algorithms are designed to breach support and resistance in order to trap retail traders into either selling their coins at a low price, or buy in at the top. From my observations, the algorithm also works around round numbers. In the case of the 22 June 2021 dump, I believe many retail traders had a stop loss limit set at $30k. These traders sold and then watched the candle climb immediately after selling.
As Sir Baller and Akin rightly point out, the Composite Man makes money from getting retail traders to buy and sell at the wrong times. The short squeeze that followed the earlier dump on 9 June 2021 was correlated with a big negative funding rate spike across all exchanges. If I could move the market like the Composite Man could, wouldn’t I put a huge spot order on with a corresponding high leverage long across all derivatives exchanges? That just sounds too good to be true!
My analysis is that whales have found plenty of supply below $30k since the 22 June 2021 dump. Seeing that they can continue to buy in lower, they are pushing prices as low as possible for the time being. We can see their bias flip, via the bearish pattern after 22 June 2021.
We are watching a lot of whales accumulate Bitcoin during this period. Address watchers on Booyah Traders have been pointing to the 3rd largest BTC wallet as it sells to create the dips and then accumulates coins during each dip. This address bought about 4k BTC during the 22-24 June 2021 dip. Are we dealing with the banking cartel here?
Big spikes in Coinbase Pro inflow mean (size of average transaction) are usually signs of institutional accumulation as institutions generally do not hold their crypto directly, rather they use a custody provider such as Coinbase Custody.
We have been seeing news that Goldman Sachs is starting a crypto ETF and multiple other institutional investors are getting in. My tin foil hat suspects that the price may continue to be pushed down with negative press headlines for some time so that Goldman’s clients and more wealthy individuals can buy in low. Presently there is too much selling momentum for there to be any meaningful bounce here. I am currently running stink bids all the way down to $25k. Lets see if this move pays off!
For the moment I’m short term bearish, long term bullish. It’s a long and bumpy road to the top. Good hunting traders!