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Analytics / Bitcoins / Breaking News

Bitcoin (BTC) Tax Day Hype Just Another Bull Trap?

Bitcoin Chart With Values

Most investors in Bitcoin (BTC) expected a big pump after tax day which is why it did not happen. Makes sense? Let me put it this way, when you start trading you put your stop loss around all these beautiful trend lines and it fails you most of the time. Then you get to thinking why people actually draw trend lines if they are not supposed to work? A little more digging followed by practice and you realize that the point where you used to place your stop loss should actually be the point you open your positions.

This is nothing new. It may be for some first time investors in Bitcoin or other cryptocurrencies but this is a decades old practice that banks and large financial institutions have been successfully using to target mainstream investors and surprisingly enough it works most of the time because most of us do not learn from our mistakes or think about why something has happened. Investors these days are quick to take to reddit and twitter and complain about market manipulation and evil schemes of the whales but they fail to realize that for most financial institutions that want to accumulate that particular financial asset, be it stocks, forex or cryptocurrencies like Bitcoin, it is a need not a want to do this. This is called iceberg orders. Consider a large institution trying to stock up large amounts of Bitcoin. They cannot buy all their Bitcoin in one go. That would spike the price astronomically and then most of us would dump their Bitcoin to take profits the next day and that large financial institution would come out as a big loser.

Bitcoin Chart With Values

We should understand by now that this game has changed a lot over the past few months. Back then it was tech geeks and early Bitcoin loyalists who used to trade Bitcoin, now institutional investors are getting their hands on it. So, we have to get used to their games if we aim to do well financially. This means that the obvious seldom happens and as a good trader, you have to be prepared for all possibilities. You should be betting on different outcomes such that you can always hedge your bets or get of trades to cut your losses at the earliest possibility. In order to that, you have to trade like the people you are trading with. Trading is a zero sum game; somebody has to lose in order for others to win. As a general rule, it helps to buy low and sell high. You will not be able to call the bottom every time but you do not want to miss out on bull runs either which is why it helps to dollar cost average your way into all trades with position sizing to your risk/reward appetite. Bitcoin may be close to beginning a new bull trend but as for right now we have to prepare for all eventualities.


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