Wyckoff Logic Suggests Bitcoin Markdown Has Only Just Begun

At the end of September 2019, Bitcoin broke down from a triangle pattern that it had been trading in throughout the summer months, putting an end to a rally that first began in the Spring.
The entire cycle from Bitcoin’s bear market bottom all the way to the recent top, appear to follow Wyckoff’s distribution model. And if that’s what is playing out in Bitcoin markets, the markdown phase of the first-ever crypto asset may have only just gotten started, and much lower prices may be ahead.
Bitcoin in 2019: The Perfect Example of the Wyckoff Method?
Richard Wyckoff was a world-renowned stock trader and author of a number of famous trading books. His success was based on the principle that markets were cyclical and went through four distinct phases at different times.
The four different phases according to the Wyckoff method, are accumulation, markup, distribution, and markdown.
Related Reading | More Whales Are Hoarding Bitcoin After Accumulating During Bear Market
Accumulation phases are periods of time when an asset’s price is at a low following a bear market or downtrend, and smart money begins buying up the asset at the low prices. After the investors have sufficiently accumulated a large position of the asset, the markup phase begins, driving up the price of the asset to later be sold at a higher price.
The accumulation phase took place while Bitcoin was trading in the low $3,000 and $4,000 range, at the end of 2018 and into early 2019. The markup phase was the subsequent rally from those lows to a local high of $14,000.
At the recent peak from the bottom, would have represented over 350% gains for investors who bought Bitcoin at its bear market low and then sold the June top.
Markdown Phase Could Take Price of Leading Crypto To New Lows
After accumulation and markup, comes distribution and markdown.
Once Bitcoin reached $14,000 distribution began, and Bitcoin began to consolidate as the initial supply being sold was met with continued demand. Eventually, the distribution caused supply to outweigh demand, and prices began to fall.

Here is another Wyckoff Logic pic.twitter.com/WszntfYScl
— Moe (@Moe_mentum_) October 12, 2019

According to Wyckoff method, after distribution comes the markdown phase, when the price of the asset begins to decline and bears regain control over the market.
Related Reading | Crypto Analyst: Bitcoin Continues To Follow Bear Market Bottom Fractal 
If the leading crypto asset by market cap is indeed in a markdown phase, as the chart structure appears to suggest, the price of Bitcoin could continue to be pushed down further and further until the price is sufficiently suppressed enough for high wealth investors to begin accumulating once again, restarting the entire process.
And if Bitcoin has entered a markdown phase, 2019 serves as a near-flawless example of a full cycle according to the Wyckoff method playing out in a market.
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How Bitcoin Distribution Is a Bullish Sign For Greater Adoption

There are a number of differing metrics analysts use to determine the health of the Bitcoin ecosystem. Hash rate and transactions are two of the most popular but distribution in terms of the number of addresses can also be used to determine adoption rates.
Bitcoin Addresses Increasing
Over the past two years the number of BTC addresses has surged indicating that the asset is undergoing greater adoption. The largest gain is the number of addresses with less than a million satoshis which also suggests a more even distribution that is not just a few whales or large exchanges.
According to director of research at The Block, Larry Cermak, this is a very bullish metric.
“This is probably the most bullish chart on Bitcoin I’ve seen to date. Even though a single person can own multiple addresses, this to me clearly indicates user growth and an improving distribution.”

This is probably the most bullish chart on Bitcoin I’ve seen to date. Even though a single person can own multiple addresses, this to me clearly indicates user growth and an improving distribution. Source @nic__carter pic.twitter.com/2vCDoiqrlL
— Larry Cermak (@lawmaster) September 8, 2019

The numbers of addresses holding very large amounts of BTC have not increased anywhere near the rate of the smaller ones. A major jump has occurred since 2017 in addresses holding just 100k satoshis despite the massive bear market of 2018. This could be a sign of mass accumulation of smaller amounts of Bitcoin.
In a similar observation, Coinbase CEO Brian Armstrong noted the increase in addresses holding 10BTC and that it too has hit a new high.
“Great charts from Coinmetrics, showing crypto industry growth. For instance, the number of addresses holding at least 10 Bitcoins recently hit an all-time high.”

Great charts from Coinmetrics, showing crypto industry growth. For instance, the number of addresses holding at least 10 Bitcoins recently hit an all-time high. https://t.co/t5HspfauJM pic.twitter.com/Yo1UNu6mZR
— Brian Armstrong (@brian_armstrong) September 6, 2019

There were a number of arguments for not using this metric such as the fact that users can have multiple addresses or the influence that large exchanges such as Binance can have. But generally it has been viewed as a positive indicator of Bitcoin growth and adoption.
Still Top Heavy?
It has often been suggested that a small number of whales can control a disproportionate amount of the supply of BTC, and thus influence its price. However, stats on Bitinfocharts.com suggest that the number of addresses holding just a dollars’ worth is also on the up.
The site suggests that almost half of all BTC addresses hold less than 100k satoshis. A quarter of addresses hold between 100k and a million satoshis and 17% contain between a million and ten million sats. Only ten percent or so of BTC addresses hold more than 1 Bitcoin according to the website, however it should be noted that there are a lot of coins being held in that ten percent!
Image from Shutterstock
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