This text describes a behavioral pattern in the cryptocurrency market, especially concerning the price drops that are observed. It argues that many of these drops, particularly those that occur during the day, are "traps" designed to scare retail investors into selling in a panic. The author emphasizes that the most significant and dangerous drops usually happen at night while retail investors are asleep.
Why do these "overnight" drops occur according to the text?
The text suggests that "big players" or "smart money" (U.S.-based institutions, for example) manipulate the market. One of the mentioned tactics is to inflate the market around 11 PM to create a "false rally" that attracts retail investors. Then, between 3 AM and 5 AM, while Asian markets are asleep, these big players initiate a massive liquidation. The main goal of this strategy is to liquidate the high-leverage positions of retail investors without giving them time to react.
Key Lessons for Investors:
* Daytime drops are often traps: The text advises not to panic at the drops seen during the day, as they are often strategies to induce fear-driven selling.
* Caution with overnight leverage: It is suggested to think twice before using leverage overnight, as it is the period when major players can execute forced liquidations.
* Analysis of higher time frames: To avoid "pump/fake sell" scenarios, it is recommended to analyze higher time frames, which involves looking at the overall market picture instead of reacting to short-term moves.
* Smart money seeks liquidity: The text emphasizes that retail investors are the target of these strategies, as "smart money" seeks the liquidity that retail investors bring to the market.
In summary, the main message is that the cryptocurrency market is a battleground between "smart money" and retail investors. Understanding these tactics can help investors protect their capital and make more informed decisions, avoiding falling into "liquidity traps."
