Anticipating Bitcoin Breakouts and Understanding Cyclical Crashes

Fables, whales, cartoons, twitter, media, technical analysis, group therapy in the aftermath of downfalls

Twice in ∼3 weeks bitcoin prices have gone up records high and somehow crashed uncontrollably. First at 13.8K then 13K. © 1994 Bill Watterson

Understanding the bitcoin market is acknowledging that it behaves in part according to its environment, much like other equities it seems to follow a community influenced pricing. This short text opens the way to a logical, game-theoryesque analysis of possible targets & breakouts for the BTX pairs using medias analysis.

Whales (aka. investors with a lot of capital) use the public drive to make gains. The average trader (except for hodlers) gives momentum to the price swings but they lack strenght in their influence.

∼ 97% of all Bitcoin addresses hold ≤ 1 BTC accounting for 4.5% of the market capitalization. Roughly 3% of all addresses really has the potentiel leverage to move the price. © 1994 Bill Watterson

Every new cycles, new levels are set by the community of traders, influencers, miners, analysts, the media, the exchanges, the regulators… These cycles often overlap each others. It is crucial to approximate when and how a breakout will happen.

Up, down, flat. Three possibilities but an infinite number of probabilities. © 1994 Bill Watterson

Some factors influencing bitcoin price:

  • Common sense” aka. psychological levels that seem to appear out of the chatter arbitrarily. It acts as a sort of self-fulfilling prophecy of the wisdom of the crowds.
  • Trust among social media, whereas a lack of trust is being shown when users/influencers make stupid-high moon calls (“guides/motivators” are trying to energize bored and deceived traders).
  • The presence of cryptocurrencies in the News.
  • When whales are hungry or need to rebalance their portfolios.
  • Different institutional projets (banks, credit, politic, law)
  • Volume and market capitalization

Strategic level’s popularity, traders impatience, and previous whales positions are the most important things to consider for future price movement.

The dog and the shadow or the bull trap?

Bitcoin price swings build plateaux and the way they are built defines how they slide.

Here are two examples:

  • A quick parabolic run leads to more upside after it pierced the roof (resistance level) because of the mediatic echoes it created, but it wont stay on top of it it for long. The fall will be swift.
  • Arhythmic/choppy while constant travel towards the top of the valley (resistance zone) will make for a longer holding time at the summit until it generates enough attention (mediatic noise) since his walk (descension or ascension) generated less volume volatility (i.e related to market cap). It needs to stop and accumulate for the big traders to sell their positions.

Technical analysis (TA) studies not the maths but the interactions of the community as a whole. It encourages, feeds and confirms the general sentiment and spasms of the ensemble. Bitcoin investing is one thing, the global social projet around cryptocurrencies and the blockchain technology are other things. One cover for the others in a continuous exchange across medias and means of communication.

The global technical analysis of bitcoin is like group therapy. It behaves like an understanding, comforting yet critical group of equals.

The whales listen to the noise from the depths. Smart money thrives on distanciation from the crowds.

During downtrends, if all the “heads” of the community (writers, notorious twitter accounts/trading view accounts) are bearish, the average small traders will follow. Resourceful traders with enough money to be in the red will catch and accumulate bigger chunks of the market, therefore encouraging the price to drop even more.

And etc. until a new law comes in action or a new trading cycle emerges or until next #altseaon or until dark pools take over and we have a so-called “truthful market”.

If there is such a thing.

A. A.

Following this I will be building a folder of different TA methods, popularity tracking tools and order books I use to monitor XBT price action. This text is an open reflexion. Some proofing needs to be done to confirm some ideas.

Note: I do not own the illustrations or profit from them.

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