Bitcoin (BTC) has now seen a long queue of red candles that reminded everyone that no matter how bad things are, they can always get worse. The price nosedived in a series of three consecutive crashes that pushed Bitcoin (BTC) to a new low for the year. While the bloodbath effectively hurt the bullish resolve and induced some long awaited panic selling, it also made the bears over confident. As the daily chart for BTCUSDShorts shows, the number of shorts kept on piling up since mid November. The number of shorts peaked last weekend as the bears began to feel comfortable. Since the beginning of this week, the number of shorts has seen an aggressive decline but for some reason most retail bears are still waiting for a miracle.
The reasonable thing to expect would be for most bears to close sell positions and get out considering BTCUSDShorts has topped out after reaching the top of the descending channel. However, sentiment works both ways. Just as the bulls felt confident around the highs of $18,000 and they expected the price to surge higher, the bears also feel comfortable thinking the price can drop to $1,000. In unregulated markets like these, a trend reversal usually does not happen without a significant portion of the population getting seriously hurt. In other words, the price of Bitcoin (BTC) may rise ultimately but first the whales have to trap in some bears. Those that have been following the market for the last few months have seen the rise in manipulation. There is manipulation in every market, but the sort of manipulation seen here is even worse than that with penny stocks.
The above daily chart for BTC/USD shows a simple case of manipulation on a larger scale. There are countless examples of manipulation on lower time frames. However, to see this kind of manipulation on the daily time frame is really shocking. If we look at the spike on the chart between October and November, we can see a long wick showing a massive retracement. If the circumstances were different, we could have believed that it was some crazy whale buying a ton of Bitcoin (BTC) and that too on an exchange. However, the situation here was entirely different as the price was trading in a descending triangle with an overbought RSI. The price had just broken below the 21 Day EMA and gotten rejected at the top of the triangle.
So, a big flock of bears thought the price was going to go down and this was the last opportunity to enter sell positions. As the number of bears increased and the short positions piled up, the whales saw an opportunity. Since most of the bears had their stops just above the triangle, the whales knew what to hit. Soon as they pumped the price slightly above the triangle, they hit those stops and the price rose close to $7,800 liquidating most shorts. Soon afterwards, as you can see on the chart, the price did what it was supposed to do and fell to new yearly lows. The point is, in markets like these you don’t have to just look at your trades, you also have to be wary of greedy whales who don’t give two sh*ts about Bitcoin (BTC) or its reputation as long as they are making an extra buck. If you think they are not going to do something because it will look like sheer manipulation or it will hurt the market, think again.