Be patient out there. Understanding the Bart Pattern on Bitcoin
If you've looked at BTC price action in the past month no doubt you will have seen periods where intense pumps or dumps occur within a very short time frame causing price action to find a new high or low for a short period. The crypto sphere has taken to calling this pattern the Bart, though traditionally its known as the diamond reversal.
In this instance its most unlikely that the buying action is natural, as in the traditional diamond, as the likelihood of all traders in the market suddenly deciding in the same moment to buy BTC is without black swan news-led events. More likely is that this kind of action is the result of momentum ignition algorithms.
Momentum Ignition Algorithms work buy creating a sharp spike in buy or sell action within a market enticing traders, or other algorithms, to follow the trade. Additionally traders will place buy orders above significant zones, to catch up trends, and short sellers will place stops losses in similar areas, these are effectively buy orders. In order for the algorithm to be most effective it has to push price into these liquidity zones, triggering buys, and from there it can disengage.
The result is the Bart, a pump or a dump, followed by a return to the mean soon after. Actors using this manipulation tactic benefit by having their sell/buy orders filled, and causing the market to open positions against the trend.
In the example below you'll see how price action fell below an area of significant resistance, painted a traditional bear flag. Once buyers were exhausted, and sellers became eager, price action fell out of the bear flag and began dump. At this moment the algo is activated and intense buying action happens. Those with shorts open rush to close them, creating buy orders, and the pump commences. In this case almost $400 of movement. A few hours later, a floor of buy orders is removed, and a momentum ignition is activated in the opposite direction causing a dump.
Interesting to watch, and hard not to want to FOMO, but patience pays better than haste in this crazy world of crypto.
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