Psychological Warfare.
When you understand that the market is an intelligent force, driven by intelligent and very powerful people, with a ulterior motive to alter the emotions of the less intelligent, you will grasp a better understanding of the tricks deployed to lead you astray.
There’s periods in the market where things will become unpredictable, unreadable, unclear and uncertain. At the time of writing, we are currently in one of those exact predicaments in crypto. Following the recent liquidation event, sentiment is scattered between the “death of crypto” and a handful of people remaining optimistic that this is actually the birth of something greater to follow. I am in the boat that something greater is brewing.
Naturally, when the market is trading in territory like this and leaving little clue on its intention, there’s an equal chance of both possibilities, as a higher level of “guestimating” is required with less of an edge provided from the clutter of the price action. It’s important to understand this. The recent liquidation event has left behind some rather nasty wicks on the weekly timeframe, which are still completely open to being filled, without it resulting in a bear market. Whilst this is happening, the price action on a day-to-day basis leaves an equally unsettling experience of illiquid movements, followed by sharp movements in both directions which are quickly counteracted. When price begins to congest in this nature, the rapid movements in one direction lead us to follow it with a higher level of emotion as the lack of movement slowly eats away at us.
Simultaneously, these wicks on the higher timeframe do not necessarily need to be filled, as in many circumstances following these routine events in crypto, they do not always get filled. It’s not the first time we’ve had a ‘black swan’, only to then chop for weeks on end and suddenly explode higher. These wicks also add additional complexities when paired with the current price action we are seeing, which I often call a war crime due to the diabolical nature of their movements. We’re seeing pumps being swallowed whole by dumps almost immediately, vice versa. We’re seeing intraday highs and lows swept continuously with no progression. We’re seeing wicks printed in excessive quantities on either side, leaving more questions of our next destination than answers.
The market has done nothing since the liquidation event, no progression. The price action is quite frankly horrible and unreadable right now.
It sounds confusing… and it most certainly is. That’s the intention here, to bamboozle and confuse.
As I am currently team upside, I want to explain my thoughts and observation behind what I feel is taking place and the intention behind it.
The general sentiment is overwhelmingly bearish at these current levels. The fear & greed index is reading ‘extreme fear’ despite Bitcoin still trading within its monthly range. For this to be the case, the fear will not only be coming from the recent liquidation event, but also subconsciously being embedded from the constant influx of tariff news being projected to us. One day it’s over, one day it’s worsening, whilst price is seemingly reacting to every single ounce of it (why would this even affect crypto btw?). This is aided by the negative sentiment online being regurgitated on people’s timelines, further enhancing the narrative of fear.
Whilst I am open to being wrong as always, I believe the intention here is to truly create mass frustration amongst holders and leverage traders. I say this because I’ve not only gone in relatively heavy on alts near all-time lows, but also because I am holding some longs right now. It certainly isn’t the most thrilling experience to say the least. We can currently see it from the behaviour of the price action that there’s likely a deeper intention behind this manic episode. Anyone going long is getting swept back to the ground level. Any downside is slowly trickling lower, generating fear of a sudden snap, shorters are building, only to quickly pump back up and counteract it all. Everyone is being liquidated, yet price isn’t going anywhere.
As the sentiment is currently in extreme fear and the narrative is mostly calling for the end of crypto, we must view the market and the correlating price action in accordance with the current narratives. This is often the best way to understand why it could be deploying one of its usual tricks. If the general sentiment is calling for lower, the slow grind down is reinforcing the ideology that we’re slowly falling off a cliff ready to snap and break into a downwards free-fall. Maybe we are, but doesn’t it almost seem overwhelmingly obvious that it would be the case? And if it’s overwhelmingly obvious, that’s exactly why it may very well not be the case.
I like to be a contrarian when markets are rising and equally as questioning of what’s taking place when the market is seemingly on the cusp of death. It is of course a risk to be this optimistic when the market is showing all signs of collapse, but it is often during these moments that the market eventually turns with the tide and the fearful propaganda quickly fades into a distant dream, forcing those currently consumed by fear to join much later on.
Every involvement within the market is a risk, irrespective of where the risk is taken. How risky it is simply determined by how much is being risked for a given position and bias, both spot and leverage. This is a game of risk vs reward. The reward is never attainable without a corresponding risk needing to be taken.
What is the risk?
Well, it’s that we absolutely crash to the ground and the entire market is obliterated.
Or… we just flush the lows one more time.
What’s the upside?
All-time highs on BTC, new highs on ETH, alt season.
Is the risk worth it?
Absolutely, if you’re risking what you can afford to lose and doing it the correct way.
To succeed in trading, there has to be a willingness to lose (risk) money. During these situations it is where that willingness must grow. If you’re holding trades with leverage knowing the market is currently set out to destroy all of those positions in both directions, you must accept that you may need to give the setups several attempts until the market returns back to fluidity and directional trends. This means reducing position sizes and keeping stops wider, as tighter stops in these trading conditions will get wiped out quickly. This also means if you’re long, you shouldn’t be scared to long again if the market goes lower, as this only increases the reward to the upside whilst somewhat diminishing the risk to the downside.
The same is applicable to spot, which is definitely preferable with what’s being endured right now by all of us. Depending on what you bought during the liquidation event or after, this will be a more comfy approach and ideal to handle the current turmoil without less emotions.
The market is currently balancing on a thin-line between make or break. Whilst the lower end of the $90,000 range is still possible on BTC and cannot be disregarded, I personally do not think it will come, as that is simply what most are now expecting to follow. This is a common characteristic we have seen throughout areas where the market has stabilised following severe liquidation and capitulation events. Take into consideration that several weeks ago everyone was saying we’re going to new highs. With the shock of the liquidation event, the fearful narratives and more, everyone’s eyes are now set lower, when they should have already been set on looking lower as we were trading around ATHs. Most crypto traders generally only look lower once the market has already gone lower.
For me there’s only 2 real possibilities here with my current bias:
- We do not sweep the liquidation event lows
- We sweep the liquidation event lows
Both scenarios for me equate to the same outcome, higher.
I do not like taking chances when opportunities are presented, therefore, my positioning has already started.
If we sweep the lows, I will long again.
If we sweep the lows, I will buy more spot.
Having fiat or stables here is a crucial element to remaining emotionally stable throughout this ordeal. It will combat the fear of sweeping lower, giving you an advantage where greater misfortune will be present amongst the masses. If you know you have money to buy if we go lower, you only see opportunity, putting you ahead of most.
The market has now been in a range for 4 months. With the October monthly candle closure now printed, we have yet another monthly closure within the range for BTC and TOTAL, giving a stronger indication that price remains consolidated above key support levels despite the recent liquidation event seen. If we hadn’t seen this closure and the liquidation event movement recouped, it may have been a different story. This sets a greater tone that any downside to start November will likely be limited in nature and nothing but a wick by the time the November monthly closure comes around.
Knowing that on many occasions we have seen the market explode higher without sweeping the lows, I feel comfortable already initiating the risk-taking process, knowing I will only strengthen the positioning further if we temporarily go lower. Seemingly there’s not many long liquidations lower right now as shorts grow larger than longs due to the underlying fear. You’ll note the price action lately as a contributing factor to this. Every long position gets a glimmer of hope before being aggressively wiped out. Eventually, all longs will give up and get tired of being stopped out and liquidated. Yet, whilst the dumps are aggressive, we’re not actually breaking lower, we’re holding strong. Perhaps that is our indication that an accumulation is taking place.
The way I see it comes down to the risk:reward.
If I were to wait entirely for the lows to be swept and it didn’t happen, would I regret it?
Yes I would. Therefore, I’m not taking chances and ensuring I have sufficient positioning in the event we do not see what most now anticipate.
It may seem like a lot is happening, the reality is nothing is currently happening. If you zoom out, the weekly and monthly timeframes show little change from open and closures.
Plus… when has the top of bull cycles ever consolidated for several months? They’re usually aggressive, explosive, and then quickly counteracted the following month.
I personally feel this is the final shakeout happening before the final explosion higher to complete the cycle. This move was a necessity and heavily overdue. Any dips should be sought to be bought up, especially for alts near all-time lows. The risk is naturally greater on those near all-time highs. Keep cash on standby for greater sweeps. Do not be afraid to take risks.
I often call this psychological warfare. A lack of movement is equally as emotionally charging as explosive movements. It leaves us confused, second-guessing, doubtful and more susceptive to moves in one direction. Position accordingly, take a step back, take a breather, let the market do what it needs to do. Being precise and perfect here isn’t a reality when the candles do not provide the clarity required for such an edge. The truth is, you don’t need perfection here, you just need to be willing to take risks in a sensible manner.
As always… take the risks or lose the chance.
We are at the depths of fearful sentiment whilst trading at this territory, that in itself could be a very telling sign.
I remain optimistic.
The market looks incredibly ugly, but in many cases that's what leads to something beautiful.
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