The Bitcoin Sell-off is Just as Odd as the Bitcoin Boom

Bitcoin is rapidly being sold off, it is taking the entire crypto market with it. It is happening at a quick pace with sell orders overwhelming buy orders… like the exact opposite of the last Bitcoin boom.

This sell-off into the $8ks and below feels a bit like other sell-offs, where selling ramped up with large sell orders on the books taking advantage of a media led panic after Bitcoin reached an all time high. It also feels a lot like the run-ups, where large buy orders took advantage of general excitement over a new technology to push prices up. Uncanny really.

In other words, it looks like the exact same tactic used to push Bitcoin’s price up and down in the past is manifesting yet again.

NOTE: What seems like “whales pushing the price up or down” is often at least in part many people running bots that are setting limit orders pushing the price up or down. If everyone’s bot says “panic sell” then you get this cascade of limit sell orders spamming until they go through. The action isn’t fully natural, because it is literally a program doing it on behalf of a person. Now add to that those who want the price to go a direction, now add to that the average buyer and seller, and you have a recipe for what you see play out.

There is some odd comfort in that, as it says “while the rise of Bitcoin may not have been fully natural, the decline of Bitcoin doesn’t seem fully natural either…. and further, it seems to be following a pattern, and thus far the pattern has been of ups and downs, not just downs.”

There is also some discomfort in this, as it signals that while there is lots of natural buying and selling happening at any price, that natural action is coupled with some action that feels a little unnatural (even for the volatile crypto space).

Moving on, now, let’s imagine that we can attribute this all to one shady villain (I don’t think we can, but to paint a picture, let’s do it anyways).

Let’s ask ourselves, why would said villain do this, what are they doing, how are they profiting from driving the price of Bitcoin up and down?

Well, there are only a few things that make sense, and those all line up with manipulation tactics used in crypto and other markets, specifically those used in pump and dumps.

Here is an example of how one could profit from everything that occurred thus far:

One knows futures contracts are coming out, so they push Bitcoin’s price down by selling off a lot of their Bitcoin, and while they do this they margin short Bitcoin (thus ending up with a pile of Tethers; this creates a demand for Tethers any way you slice it). Then they push the price up, also maintaining a long margin position (more demand for Tethers). Then they keep pushing the price up; margin long. Then they take out a futures contract shorting the Bitcoin market (while moving BTC over to Ripple, then alts, then Ether). Now their buy orders are gone, but their BTC isn’t being sold of for dollars, so the market stagnates just under that nice whole number $20k but doesn’t drop. Then they pump altcoins one by one using BTC as a currency and then dump them for BTC and ETH; they take appropriate margin positions. Then they sell off their remaining Bitcoin, margin shorting it on the way down. This drives the entire market down (thus presenting opportunities to short other coins). Since they can’t sell fast enough to profit if they drop the market too quickly, they let it ease back down as they sell off all the coins they bought in order to push Bitcoin up (they are sitting on countless millions at prices like $15k, so they need it to fall slowly to unload). Letting the market fall gently also gives room to play the bounces. Then, the price is dropped down to the support everyone called, which is looking like $8k, but could be lower (like $20k it was a nice expected whole number; at the same time you have expected lows like $5.5k).

Now add to that how one profits off icos. ICOs make Ethereum’s Ether, the parent token of most ICOs, a good last coin to hold strong, plus Ether is a little less in the public eye.

Things like that.

The grand result for anyone not trading the situation created above is Bitcoin is just a little higher than it was before, alts are a little higher, ETH a little higher, etc. The market is slightly better off, our villain is Jeff Bezos rich if they played their hand correctly, and those who bought right at the start of the rally are back at square one or a little better. Only people who got burned were people who bought futures or coins at the top.

I mean, in retrospect, that plan (which I am not saying actually ever was an orchestrated plan) would be 1. sort of evil, 2. sort of genius… and, 3. morally justifiable to the amoral (as “they left the market slightly better off than it was,” “free market,” something like that; sociopath logic works like that bit).

Since this is how pump and dumps work, this is really only the assumption that someone tried to pull off a grand pump and dump.

Thus far they succeeded.

On the plus they had this great set of circumstances under which this was possible. Bitcoin Cash drama, news of futures contracts, a wave of new adoption, bullish analysts calling $20k, bearish analysts calling a correction to $5.5k to $8k, a string of bad news in January. If you don’t squint all those events, knowledge of economic bubbles, and a glance at the charts would have you look at crypto from a wide view and think “well yeah, of course that all happened the way it did, the writing was on the wall.” However, that logic explains the overall pattern better than explains exactly how everything went down in real time. In real time giant buy orders were thrown up on the books when prices went up and giant sell orders were thrown up when it went down. In neither case were those buy/sell orders filled, rather they were used as a show of force and helped move the markets in a sort of unnatural way (both up and then later down).

Now, consider this: Although one person or group could have done all that, it is much more likely that different entities all did different bits of the above and the grand result was what occurred. In other words, a sort of collective intelligence just resulted in this situation.

I.e., I’m saying it is likely that there is no villain aside the human condition herself (there are whales and bigger players on each side, but ultimately it was the plotting of the many and expectations of many, not the few; the few just saw the writing on the wall and rolled with it).

Or maybe none of that occurred and all the giant buy / sell orders and price action and other events are fully natural? Who am I to say?

We can complain, we can spin theories, or we can take advantage.

How do we take advantage? There is only one answer at this point:

Buy and hold, thus helping the bulls to ward off those pushing the price down (although, to be fair, people on the sell side will likely be back on the buy side soon enough… it is doubtful they are out of the game for good). That could mean throwing up buy orders at $8k, or it could mean buy orders at $5k. I would generally suggest laddering in between those points, but getting it just right is hard if not impossible (see thoughts on taking advantage of the correction). The hard part is jumping inside the heads of the bears. Is it simple, are they just trading by the charts? If so then we are likely to find support in that $5.5k to $8k range. Or, is there something a little more complex going on. Do we have to ask ourselves, “when did the villain start building their position and what is the end game?” We have to assume that anyone pushing the market down (be they one shadowy villain or a disorganized and uncoordinated collective of bears) won’t sell down below their buy price. Meanwhile, if the end game is to beat crypto into the ground, then there is no place at which the beatings will stop. Meanwhile, if the end game is to keep playing crypto, then pushing the price lower and lower risks creating a long bear market where there is very little money to be made. That doesn’t seem ideal. Regardless of all the whys, for as long as the correction continues, the selling-off will likely take breaks and give the price a chance to recover before the selling starts again (the pattern so far). With that uncertainty in mind, we could buy and sell the bounce to be safe, or we could buy on the way down to create an average position for later and be a little more risky. Either way, despite the carnage, the end result is that there are lots of good buying opportunities are being created and one must imagine at this point in the cycle…. that is kind of the point.

Author: Thomas DeMichele

Thomas DeMichele has been working in the cryptocurrency information space since 2015 when was created. He has contributed to MakerDAO, Alpha Bot (the number one crypto bot on Discord),...

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