Bitcoin (BTC) has finally broken below the pennant but a lot of investors are worried as to why that might have happened. Before this drop actually happened, I posted a similar chart on Twitter saying, “If you want to determine which way BTC/USD is going to break, you need to determine who benefits if it goes up and who benefits if it goes down.” If you look at the Longs vs. Shorts ratio, retail traders were 73% long and 27% short on Bitcoin (BTC). That difference has now declined to 68%-32% in favor of longs but it is still quite a difference. Now, think about this, the price broke above the descending channel but it did not go up or fall down like it did the last two times. Instead, it entered a boring pennant. Why?
More than 100 million longs liquidation is why. This was the perfect opportunity for market makers to trap more bulls. A lot of them called this the bull pennant and expected the price to shoot past $12,000 after breaking out of it without realizing who that move is going to actually benefit. So, who is it going to benefit the casino or the players? Definitely the players because they are 70% long on Bitcoin (BTC) anyway and breaking past $12k means that we are going towards $14k at least so that’s basically free money for the bulls that bought on hype. What does this mean for the casino? It means that they would not only lose money by handing massive payout to these players but they would also lose a lot more in potential profits if they had ‘helped’ the price down and liquidated these aggressive bulls.
So, what is going to happen next? The most likely scenario is that the market makers will keep on giving retail traders hope to “buy the dip”. They will keep on buying those dips and the price will keep on falling systemically slaughtering most of these aggressive bulls until the longs vs. shorts ratio turns in favor of the shorts. That is when we can finally expect the market to bottom and begin a new bullish cycle from there. A lot of traders fail to realize that this market is not short of catalysts that could inflict serious pain on Bitcoin (BTC) and the rest of the cryptocurrencies.
The red candle that we see on the 5 minutes chart for BTC/USD, we could easily see something like this on higher time frames. It is not difficult for the people that control Bitcoin (BTC) to do that, but why kill the goose while it is laying golden eggs? There are still too many people that will buy the dips and as long as people are eager to buy the dips, the market makers will give them the opportunity to do so. The bear flag on the 5 min chart points to the manner in which BTC/USD is expected to decline from here. The market makers will try to trap as many bulls as possible but at some point they are going to have to decide if doing that is worth allowing more shorts to stack up and that is when Bitcoin (BTC) will crash hard.