Bitcoin made a vertical move up on Monday amid a message about the purchase of cryptocurrency by Tesla. At the time of publication, BTC is trading near its new all-time highs, with a 2% decline over the past 24 hours. However, the Fomocap analyst believes that the cryptocurrency can make a full reversal and as a result, fall back below $ 40,000. He points to the so-called “Bart Simpson pattern” as a rationale.
#Bitcoin Hey pic.twitter.com/bmFoaRKzan
— Fomocap trades (@Workedia) February 10, 2021
This pattern got its name due to the similarity to the head of a cartoon character and in this form it appears almost exclusively in the cryptocurrency market. This is due to manipulations aimed at generating liquidity at inflated prices. It is characterized by a sharp rise in the rate, turning into a sideways trend, followed by an equally sharp fall. One of the signs of Bart that helps distinguish it from a bullish flag is the presence of new highs close to the first. At these levels, traders usually buy when they see resistance breakout or place stop orders for short positions.
Multiple failures on key damage after a vertical lift usually indicate an ongoing “stop hunting”. Sellers seek to control the market and maintain liquidity at the level of interest to them to distribute their supply at the expense of buyers and closing short positions. “Eat my shorts” – said Bart Simpson in the animated series, literally offering the interlocutor to eat his shorts. In the cryptocurrency market, shorts or short positions do not mind eating the “whales” themselves in order to force their owners to buy cryptocurrency from them.
“Bart” in June 2020
Subsequently, liquidity at these elevated levels dries up, resulting in a complete rollback of the upward movement. Unlike Bart, on a bullish flag, liquidity pools are located below the chart. In other words, declines are bought off, but higher highs do not occur, that is, there is no sign of “stop hunting”. Such a pattern often ends with a breakout of resistance for a confident upward movement, which is not the case with Bart.
Bullish flag
In broader technical analysis, such patterns are called the Wyckoff Accumulation and Distribution. Barts are formed by manipulators to give retail traders a sense of the right moment to buy. Although, in general, the occurrence of Bart does not exclude the possibility of placing short positions, it is possible to lose money if stop orders for them are in the liquidity pool above the chart, where the whales will hunt for them. Such stop orders are knocked out using point strikes, after which the price invariably returns to the previous channel, but by that time your position will already be closed at an unfavorable rate.
High funding rates in the futures market also speak in favor of the version about the likelihood of a sharp correction in the rate. Over the past two days, they have continued to rise and have reached extremely high levels of about 0.2%, indicating a significant predominance of marginal long positions that can be liquidated in one moment.
Obviously, by the time of the announcement of the $ 1.5 billion investment in Bitcoin on Monday, Tesla had already bought the cryptocurrency on the spot or OTC market, and the subsequent growth from $ 39,000 to $ 48,000 was largely due to the actions of speculative traders on derivatives.
The analyst calls the dynamics of the inflow / outflow of assets on the exchanges as another alarming factor. Thus, over the past 24 hours, the exchange balance in bitcoins has grown by 2,161 BTC ($ 98 million). During the same time, USDT stablecoin outflow amounted to $ 39 million.
If the Bart scenario plays out, the analyst names the $ 42,200, $ 39,600 and $ 36,000 levels as his next targets, assuming that Bitcoin may resume its rise after the funding rates cool.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
