How Different Market Players Create Price Action (BTC + Alts)
Updated
This is just an exercise. I'm not even assuming here that there will be another cryoto bull market. I'm just showing what I think different market participants are doing at each given point in this current "cycle." On this chart, the yellow is Bitcoin, blue is Bitcoin dominance, and orange is TOTAL2 (altcoins). The market is in a long consolidation period. Eventually, one side will be right.
In this analysis, there are three main players:
Retail These traders individually have a minimal effect on the market, but they provide the liquidity for whales and smart money to enter/exit large positions. This is why they're often late to the party. It has to do both with psychology and actual purchasing power.
Whales These chad bros are the ones with the deep pockets, but who know little about financial markets and just want to make their pockets bigger. Whales are more of a wild card. They don't necessarily dictate the narrative, but they have larger purchasing power than retail. In that sense, their moves are pretty obvious, but they're not always right. As we saw recently, whales can be very very wrong, and lose all their money in a giant liquidation event.
Smart Money These guys are who dictate the narrative. They have the power. Now, they're not necessarily smart individually, but they're labeled as "smart" here, because they "control" the market. They have even more wealth than your average whale, and will have the final say, no matter what. They can afford to lose a minimal amount of money in the crypto market. In fact, the entire market cap of Bitcoin can be purchased by a single one of these entities with ease. Now of course "smart money" entities may disagree with each other. But it's fairly easy to see where they enter and exit, because they need the most liquidity. Their moves occur at the highest volume peaks, when even whales have capitulated.
****Small Chart Edit: Smart money most likely exited prior to or during the big liquidity event. Not precisely at 10.5K. Then some may have bought back near bottom while others who weren't in already were able to buy
In crypto, I don't believe smart money has really entered the altcoin market much, but I do believe that whales who have been present in this market do indeed buy altcoins, with the hope that larger entities may buy them. One reason why Bitcoin tanked a bit harder than alts recently is that there are more whales and smart money in Bitcoin. Those big sellers did not exist in such large numbers with altcoins. Hence why alts are back above their support from this past December.
My reasoning for coming to these conclusions also has to do with volume (particularly on-balance volume, which has been extremely high for alts over the last year) and the relationship between Bitcoin and other cryptocurrencies. At certain points, altcoins have outperformed Bitcoin, but not much during the last two years. However, they've been slowly creeping up on their ratios since last September. We don't know whether or not this will continue, particularly since alts seem to be losing some dominance to Bitcoin as it recovers. For dominance to continue heading lower, I'd prefer to see Dominance decline as Bitcoin rises. If Bitcoin suddenly explodes to ATH levels, I can see this happening...but if global markets are about to head back down, alts may suffer again and begin to lose their strength against Bitcoin.
Making an analysis like this helps me to understand "why" things happen. It helps me stay calm and rational. Even if crypto collapses entirely over the coming years, charts like these will help me understand what caused the big moves, even if it's only speculative.
This analysis isn't meant to predict what will happen in the future. It's just to show the behavior of market participants over time. Of course, let me know your thoughts! This is not financial advice.
-Victor Cobra
In this analysis, there are three main players:
Retail These traders individually have a minimal effect on the market, but they provide the liquidity for whales and smart money to enter/exit large positions. This is why they're often late to the party. It has to do both with psychology and actual purchasing power.
Whales These chad bros are the ones with the deep pockets, but who know little about financial markets and just want to make their pockets bigger. Whales are more of a wild card. They don't necessarily dictate the narrative, but they have larger purchasing power than retail. In that sense, their moves are pretty obvious, but they're not always right. As we saw recently, whales can be very very wrong, and lose all their money in a giant liquidation event.
Smart Money These guys are who dictate the narrative. They have the power. Now, they're not necessarily smart individually, but they're labeled as "smart" here, because they "control" the market. They have even more wealth than your average whale, and will have the final say, no matter what. They can afford to lose a minimal amount of money in the crypto market. In fact, the entire market cap of Bitcoin can be purchased by a single one of these entities with ease. Now of course "smart money" entities may disagree with each other. But it's fairly easy to see where they enter and exit, because they need the most liquidity. Their moves occur at the highest volume peaks, when even whales have capitulated.
****Small Chart Edit: Smart money most likely exited prior to or during the big liquidity event. Not precisely at 10.5K. Then some may have bought back near bottom while others who weren't in already were able to buy
In crypto, I don't believe smart money has really entered the altcoin market much, but I do believe that whales who have been present in this market do indeed buy altcoins, with the hope that larger entities may buy them. One reason why Bitcoin tanked a bit harder than alts recently is that there are more whales and smart money in Bitcoin. Those big sellers did not exist in such large numbers with altcoins. Hence why alts are back above their support from this past December.
My reasoning for coming to these conclusions also has to do with volume (particularly on-balance volume, which has been extremely high for alts over the last year) and the relationship between Bitcoin and other cryptocurrencies. At certain points, altcoins have outperformed Bitcoin, but not much during the last two years. However, they've been slowly creeping up on their ratios since last September. We don't know whether or not this will continue, particularly since alts seem to be losing some dominance to Bitcoin as it recovers. For dominance to continue heading lower, I'd prefer to see Dominance decline as Bitcoin rises. If Bitcoin suddenly explodes to ATH levels, I can see this happening...but if global markets are about to head back down, alts may suffer again and begin to lose their strength against Bitcoin.
Making an analysis like this helps me to understand "why" things happen. It helps me stay calm and rational. Even if crypto collapses entirely over the coming years, charts like these will help me understand what caused the big moves, even if it's only speculative.
This analysis isn't meant to predict what will happen in the future. It's just to show the behavior of market participants over time. Of course, let me know your thoughts! This is not financial advice.
-Victor Cobra
Note
I'll add: I think that if we are going to see another crypto cycle, we can expect, based on the behavior I've noted in this analysis, that we won't see the market peak again until retail starts to buy alts again. We haven't seen this happen clearly. If that ever occurs again, I think it will tell us that we are close to a top.Note
So far, this has actually played out pretty much the way I was insinuating. Alts have continued to outperform, as dominance has continued its steady decline. Meanwhile, prices have accelerated to the upside across the entire crypto market.Note
If TOTAL2 (orange) rises above Bitcoin (yellow), we'll be in full bull mode.
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