Chart for BTC/USD (1W)
Bitcoin (BTC) has not had a fall this aggressive since June 2018. Yesterday, the price of Bitcoin (BTC) nosedived in a matter of hours on what seems to be insignificant news. Apparently, the cause of this dump was Goldman Sach’s announcement that it is scraping off its crypto trading desk for now. The market reaction to this is completely unreasonable given the fact that it is nothing out of the ordinary for a financial institution to pull away resources from a market with low trading volume. This does not mean that Goldman Sachs would never get into cryptocurrency trading ever.
In this market, most people have a habit of pointing fingers. So, if something unprecedented happens, people expect that there has to be a solid reason. In this case, I do not believe that Goldman Sach’s announcement was the real reason of the dump. It did help trigger the second phase of the sell off when the media hyped it up, but the real cause was whales trying to play the small guys in the last accumulation cycle. I know it sounds very cliché to say the whales played the small guys or manipulated the market, but sometimes things are not as complicated as people expect. Whenever a market is at the point of a trend reversal and the volume is low, the market makers play these games to trick the naïve investors into believing that things are about to getting a lot worse and this is the time to get out.
The 4H chart above for BTC/USD shows how steeply the price fell from just above $7,000 to just above $6,000 till it settled around $6,400. The price has now formed three candles above the trend line confirming that it is holding this line for now. The RSI for the above chart is back in the oversold territory and the price is now looking to rally from here. This dump could be called the last wave of capitulation or the final accumulation. The people who held at these levels are unlikely to give up even if Bitcoin (BTC) falls below $6,000 and the whales know it.
It is pertinent to note that market makers are only going to push the market to the extent where they can lowball but at the same time not spook the horse. Deep down they realize that they cannot scare away the sensible people in the game for if they do that, it will the end of the game. This would mean a loss of incentive for all the stake holders including miners, exchanges, market makers (liquidity providers). None of them are going to allow that to happen because that will push Bitcoin (BTC) as well as the rest of the market into a long term bear trend. It is in the interest of the major stake holders to play the game such that they respect long term trends lest they kill the game.