Good evening Hivers!
I don't have a lot of time today but I wanted to share an update to my last post:
@captaindingus/apparently-this-was-my-fault-lol-
I first posted about how strong Bitcoin was looking and how well it had performed over the previous year.
I showed a few key levels of Support and Resistance and stated that we "Triple Tested" a key Resistance and were above that price point... I then said: "if we close above this level on the daily candle, that's looking bullish - very bullish..."
To which the Universe literally LAUGHED IN MY FACE... and the next day we dropped from $45.5k down to about $41.5k in EIGHT HOURS...
I guessed and said: I either caused this and that's my bad... or in actuality it was one of two scenarios: ETF Denial or Liquidity Hunt...
I read an article about it on CoinMarketCap (CMC) and basically the Perpetual Future Swaps were funding at an INSANELY HIGH 66% rate...
A lot of people were extremely bullish and were not only taking out Long positions but were taking extremely high funding rates on the PerpFutures...
Aaaaaaaaaaaaaaaaaaaaaaand someone went Liquidity Hunting or aka Stop Hunting...
What that means is someone noticed an unbalanced amount of Long/Short positions that were over leveraged... By taking an opposite position and then forcing the overleveraged positions to fail by causing the price to move in the direction that would cause them to get liquidated...
They can force the price to move drastically in one direction (the direction of their position)... and then close said position, making money... and then getting their assets back on the cheap.
I've used a lot of generalization but let me be specific with my following example:
Let's say you see a lot of people with Long Positions: They make money when Bitcoin goes UP. If it goes DOWN, they lose money. If it goes TOO FAR DOWN... They lose ALL THEIR MONEY.
The way you would "Stop Hunt" is most people who trade on Leverage (borrowed money) will set a price point where they either:
A. Exit/Close the trade to avoid losing too much (this is called a "Stop")
and/or
B. Get Liquidated and lose their ass...ets.
When there are a LOT of positions going one way... Long in this case... that means if someone can start a chain reaction of forcing those positions to "Fail" by making the price go down... they can cause the price to DRASTICALLY fall as multiple Long positions either Close or get Liquidated.
Remember:
You make money on a Long when the price goes UP...
Conversely, you make money on a Short... if the price goes DOWN
So... let's put it all together:
Step One: Spot the opportunity... We broke resistance... trending up... sentiment good... Technicals signaling Bullish... Extremely High Funding Rates... WAY TOO MANY Long positions...
Step Two: If they're Long... let's open a Short!
Step Three: Open a LOT of Shorts... AND FORCE THE PRICE DOWN...
Step Four: Price CRASHES because too many Longs are being closed due to hitting their "Stops"...
Step Five: You've reached the end of your funds and you've made a ton... CLOSE YOUR SHORTS AND... PROFIT
Here's what that looks like... it's BRUTAL yet in this case, beautiful to see such an amazing example of it:
We are looking at the BTC:USD Chart using 4 Hour Candles and yeah... that would pucker up ya bootyholes if you were new to Crypto...
Remember how I said "Volume ALWAYS signifies a price change"...
However, if you notice, we were just above the Top Bollinger Band... we plummeted almost all the way to the Bottom Bollinger Band and have regained ground to the Middle Bollinger Band...
Bollinger Bands can also signify resistance... so I hope we can continue our climb, take $45k out and move up to $50k+...
Thank you for joining me, that's all I have today!! I hope you found it informative and I will do my best to post another one tomorrow!! Depending on whether or not I make a Splinterlands post, that may use my free writing time for the day... But I promise, I will definitely be back!!
This post and none of my other posts are financial advice. I am not telling someone to purchase/hold/sell or invest in any asset. What you do with your own money is up to you... my posts are just my observations and opinions!
If you liked it: please follow me and reblog for visibility!!
I appreciate the support and it definitely encourages me to share more of these along with my experience - an entire DECADE of it, in the Crypto world!
Please let me know what you think, any charts or topics you'd like to see and how I can improve in the comments below!
I look forward to reading them and if you decide to follow me, please say so in the comments so I can follow you back 😄
Cheers 🍻,
- CaptainDingus
