I always believed a good trader must have a working narrative about what is going on in the market. I also always believed that to trade any cryptocurrency you need to have an idea what is going on with Bitcoin.
Here's my narrative about Bitcoin market:
The perfect event to center this analysis around is the monster volume candle of April 12. The unprecedented buying force appeared out of nowhere pushing the price from around 6.9k to over 8k, over 16 percent. But even more impressive demonstration of the sheer buying force that have shaken the market was the volume of the move itself - with the unbelievable 1.2 billion dollars worth of volume it presented the biggest hourly volume ever seen in Bitcoin.
So what really happened that day?
Bullish bias dominates Bitcoin markets so very few people ever questioned the nature of the move itself. When the price grows up it's all because of increased adoption, solid fundamentals, organic demand or even "who gives a fuck... I'm making money". But to me it seems just impossible that such move could be the result of organic growth in demand. Instead it seemed much more likely to be either the working of a single huge market operator, coordinated work of a group of large market operators or at least the result of a massive wave of algorithmic trades triggered by someone who understands the market well enough to prepare and properly time such a move. To understand what happened we must closely observe trading in the preceding days.
Barts and inverted Barts
The days before the monster move have been dominated by choppy indecisive trading interspersed by short lasting inorganic up and down moves that Twitter humorously named Bart and Inverted Bart pattern. Lots of traders were having their margin positions liquidated in the process and even more got stopped out of their positions. There was some definite profit to be made if you could control those moves and those of us that were closely watching the markets were in consensus that large operators are causing this market behavior in order to suck the liquidity out of the market. Now however I have a different opinion about those moves. I believe a large operator was testing the market in preparation of the trend reversal.
How to operate when you're huge
I will best explain my idea if we try to think from a perspective of a huge Bitcoin whale (let's call him The Operator) with trading account worth billion dollars or more. This massive operator is large enough to move the market on its own, but still significantly smaller than other market participants combined. So to move the market the way he wants he must use his trading power either in the direction of the regular market movement or by giving it a little push when it's in the state of equilibrium between buying and selling forces. When the trend pushes the price up The Operator is trying to accumulate as much Bitcoin as possible, and when the trend is pushing the price down The Operator is actively trying to distribute as much Bitcoin as possible to the public. So let's say I am The Operator - huge enough to move the market on my own so if I want to buy I can't do it just like that or I'll push the price up too fast and will have to cease the operation. So I'll have to cover up my act by acting within the periods of perceived stability. Until I accumulate enough, of course.
Test and trigger
When I had accumulated certain amount of BTC incognito I would want to find the right moment to trigger the uptrend. Market is still much bigger than myself and to move it I must first establish the right moment. I would do that by careful testing of the market, giving it strong buying and selling impulses and closely observing how the price reacts in terms of ease of movement, penetration of support/resistance levels, and the momentum build-up. Those tests would be very visible on the charts. Those are Bart patterns. Once the tests are positive it's time for takeoff. The takeoff was of course scheduled for April 12.