Bitcoin (BTC) is trading just around $8,300 at the moment but now risks further downside. We can see on the 1H chart for BTC/USD that when the price broke below the 200 moving average that is when the downtrend began. We have expressed the probability of a decline down to the 61.8% fib level many a time before and it seems to be finally happening now. This would pull the price down to the $8k during which time the bears would begun to become overly confident. We are seeing a head and shoulders formation on the 1H chart which could end up pulling the price even lower than the 61.8% fib level at $8,007 to give the bears more reason to short the market.
Such tactics and games have been played over and over again in this market and they have worked quite effectively We see most retail traders make the same mistakes all the time until they reach the conclusion that technical analysis does not work and end up either giving up or hodling for longer periods which is exactly what the big players want them to do. Now, the thing is technical analysis does work but it doesn’t work the way you were taught. Textbook TA is a lot different than what happens on the ground. In fact, Textbook TA forms a big part of the tactics and schemes the market makers and the whales use to prey on retail traders. The fact that so many retail traders swear by simple TA trends and patterns for instance, lines, formations or patterns gives the big players in this market an opportunity to target a large pool of such traders.
There is no way we can compete with the big players in this market. All the retail traders combined cannot make a larger impact than the small number of whales and market makers that swing the market up and down so effectively to their will. So, there are two things the average investor can do. The first is to use their classical TA knowledge to buy near bottoms and sell near tops on a larger time frame, something which is also known as value investing. This is an approach effectively used by investors like Warren Buffet and it works, quite well.
The other approach which requires a lot more knowledge, experience and dedication is to identify who runs this market and then to play by their playbook trying to mimic their moves and follow the direction they want to swing the market to which is almost always against retail trades. If the sentiment is rising, you would see these big players look for ways to crash the price. Why? They see a honey pot! A large pool of long positions with predictable stops. All they have to do is crash the price to hit the first few layers of stops which then triggers a chain reaction that could be exacerbated by these big players if and when they so choose. At the moment, the play that we see here is a two-pronged move to first shake out the bears and then the bulls at levels closer to or higher than $10,000. The daily chart for Bitcoin dominance (BTC.D) makes it quite clear that the time to play these games is about to come to an end and this may very well be the final aggressive bullish move before the next major downtrend begins.