What Are Imbalances in Crypto?
Imbalances refer to a "discrepancy" in the market, occurring when one type of market participant is more dominant than others. This leads to two types: bullish imbalances and bearish imbalances.
Bullish imbalances happen when there are more buyers than sellers, causing prices to rise.
Bearish imbalances occur when there are more sellers than buyers, leading to price drops.
These imbalances cause prices to move "out of range." However, in an efficient market, imbalances are typically "filled" or "closed" as prices return to retest the imbalance area.
Other terms for imbalances include Fair Value Gap (FVG) or Liquidity Void.
Maybe next time, we'll explain how to apply trading strategies using imbalances in the crypto market!