The S-Pattern - Where or Why Does This Happen?
Hey folks - been a while since I made one of these (not too much interesting movements in the crypto markets lately, honestly), but after a long period of inactivity in XTZ, *something* seems to have triggered a move.
There's a few people wondering where this spike in Tezos came from - unless the transaction was triggered by literally one wallet (unlikely since that would have been identified by now), we can only really speculate as to who or what "bought the dip". But generally speaking, the extreme verticality of the "pump" suggests that this was an automated trade or possibly someone with access to a button to make large hyper-coordinated trades. (If a bunch of people get together and buy-in together the price usually rises as a slope over time, not a spike.)
Since we are in a bear market right now, the rules of the game for investors changes a bit. But it's important to remind yourself of the fundamentals of supply/demand and incentives in markets themselves doesn't change. So based on that, we can make a few educated guesses:
1. Bear markets don't necessarily mean that there is no money to invest - lots of people exited the market at the beginning of this bear market, converting their assets into cash. (These are the folks who quietly sold at the top and can be considered "smart money".) They are waiting for the market to bottom out as the hype fades away.
So the money to invest itself is there (it is always there, really) - it's just unsure where or when to get back in right now. Someone or something made the guess that *this* is the bottom now, in other words.
2. The vertical part of the S-pattern suggests (automated or not) large-volume investors getting in, while the gradual slope downwards back to its original state is likely smaller investors exiting out of the ecosystem. (Many have expressed frustrations with the coin not having moved in a while and have been waiting for moments like these as an excuse to exit.)
This is primarily the way markets "cleans" itself of short-term players and the reason why institutional investors often beat retail ones in the long - they have the means and patience to wait until the very bottom of the "valley". (Another reason why it's important to only invest what you can afford to lose.)
3. You have to be careful of getting your news from the media or social media because during down markets most talks and discussions will be about how bad the markets are - which is the obvious thing to complain about during those times. The negative sentiment eventually becomes a self-fulling prophecy and the price will continue to dip until the "losers" have left the scene.
If you think about it, the only people who have a reason to complain are the ones that bought at the top and looking to recoup their losses. The ones that were in early, holding for long-term, or sold at the right time (lucky them!) don't really have much of a reason to engage with doom-spiral content.
4. And finally - smart-money investors look for primarily two things: A reason to get back in (will not happen with ponzi or vaporware projects, which is a good thing), and the right time to get back in. Even if they have done their research and believe in a project strongly, when half the people in the ecosystem are in a panicked state, it doesn't give them much confidence to get back in. At least not yet. So they wait until the price flatlines and things get quiet - are the folks threatening to exit gone yet?
This is the reason why big rallies often happen unexpectedly after long periods of no movements, rather than a "rebound" after a massive dip. It is the waiting game smart investors play to get the best spread between buying low and selling high.
--
A lot of this will feel weird and unfamiliar because I don't think crypto really has really gone through a "real" bear market - it was a product of the post-2008 0-interest rate era and a lot of the rallies were sustained by VC and hype money, which fueled a lot of irrational behavior during the last few cycles as a whole. (Including FTX.)
But now that that era has come to an end, what comes next? A bit of spring cleaning in the markets is in order - I think. A lot of people have been waiting for this moment to come for a very long time, so it could possibly be one of the biggest rebounds in history...but only time will tell. Good luck, folks. 🤞
There's a few people wondering where this spike in Tezos came from - unless the transaction was triggered by literally one wallet (unlikely since that would have been identified by now), we can only really speculate as to who or what "bought the dip". But generally speaking, the extreme verticality of the "pump" suggests that this was an automated trade or possibly someone with access to a button to make large hyper-coordinated trades. (If a bunch of people get together and buy-in together the price usually rises as a slope over time, not a spike.)
Since we are in a bear market right now, the rules of the game for investors changes a bit. But it's important to remind yourself of the fundamentals of supply/demand and incentives in markets themselves doesn't change. So based on that, we can make a few educated guesses:
1. Bear markets don't necessarily mean that there is no money to invest - lots of people exited the market at the beginning of this bear market, converting their assets into cash. (These are the folks who quietly sold at the top and can be considered "smart money".) They are waiting for the market to bottom out as the hype fades away.
So the money to invest itself is there (it is always there, really) - it's just unsure where or when to get back in right now. Someone or something made the guess that *this* is the bottom now, in other words.
2. The vertical part of the S-pattern suggests (automated or not) large-volume investors getting in, while the gradual slope downwards back to its original state is likely smaller investors exiting out of the ecosystem. (Many have expressed frustrations with the coin not having moved in a while and have been waiting for moments like these as an excuse to exit.)
This is primarily the way markets "cleans" itself of short-term players and the reason why institutional investors often beat retail ones in the long - they have the means and patience to wait until the very bottom of the "valley". (Another reason why it's important to only invest what you can afford to lose.)
3. You have to be careful of getting your news from the media or social media because during down markets most talks and discussions will be about how bad the markets are - which is the obvious thing to complain about during those times. The negative sentiment eventually becomes a self-fulling prophecy and the price will continue to dip until the "losers" have left the scene.
If you think about it, the only people who have a reason to complain are the ones that bought at the top and looking to recoup their losses. The ones that were in early, holding for long-term, or sold at the right time (lucky them!) don't really have much of a reason to engage with doom-spiral content.
4. And finally - smart-money investors look for primarily two things: A reason to get back in (will not happen with ponzi or vaporware projects, which is a good thing), and the right time to get back in. Even if they have done their research and believe in a project strongly, when half the people in the ecosystem are in a panicked state, it doesn't give them much confidence to get back in. At least not yet. So they wait until the price flatlines and things get quiet - are the folks threatening to exit gone yet?
This is the reason why big rallies often happen unexpectedly after long periods of no movements, rather than a "rebound" after a massive dip. It is the waiting game smart investors play to get the best spread between buying low and selling high.
--
A lot of this will feel weird and unfamiliar because I don't think crypto really has really gone through a "real" bear market - it was a product of the post-2008 0-interest rate era and a lot of the rallies were sustained by VC and hype money, which fueled a lot of irrational behavior during the last few cycles as a whole. (Including FTX.)
But now that that era has come to an end, what comes next? A bit of spring cleaning in the markets is in order - I think. A lot of people have been waiting for this moment to come for a very long time, so it could possibly be one of the biggest rebounds in history...but only time will tell. Good luck, folks. 🤞
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