Bitcoin is entering a phase of accumulation in the $7,400 region following a volatile 48 hours of price action.
The world’s largest cryptocurrency surged by 8% yesterday before retracing the entire candle – although a 4.72% rally has since been seen to the upside.
The accumulation phase has been signposted by the unpredictable ‘Bart’ pattern, which is a bizarre stage of price action caused by a momentum ignition algorithm.
The algorithm is banned in the majority of traditional capital markets, as traders can use it to manipulate price action by attracting other high-frequency traders to buy or sell the underlying asset.
It has historically been used throughout Bitcoin’s 10-year history, becoming more prevalent since the 2018 bear market.
Within cryptocurrency, it is used by traders who want to accumulate Bitcoin on derivatives exchanges like BitMEX or ByBit.
It works by luring unsuspecting traders into a false sense of optimism, demonstrated by yesterday’s 8% rally, before sending the price back to the starting point and liquidating long positions along the way.
This means that Bitcoin may be gearing itself up for another gruelling period of stagnant price action, with price likely hovering between the $7,150 level of support and the $7,900 level of resistance.
If Bitcoin can break above $8,000, then it may trigger a rally towards the confluence of the recent death cross, which is currently around $8,600.
However, as pressure from the death cross mounts, a more likely scenario is that Bitcoin will succumb to a slump in price, with common targets down at $5,900 and $3,150.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.