Bitcoin $BTC is still in the process of washing out, and today there was a double explosion on both sides! Many traders shorted first and then went long, being toyed with by the market.

Want to avoid losing your wealth in such extreme market conditions?

So you first need to understand the principles behind this.

Why did Bitcoin suddenly surge to 88500 today, then plummet to 82000?

The reason for Bitcoin's surge is actually quite simple. Bitcoin has always had a clear downtrend line, as shown in Figure 1.

Referring to Bitcoin's K-line over the past two months, we find that every time Bitcoin rises near the downtrend line, it leads to further declines.

Following this logic, a large number of traders will set up short positions near the downtrend line. This trading method has proven effective over the past two months, as shown in Figure 2.

However, this time the situation is different: this time, the Bitcoin K-line created an illusion of successfully breaking through the downtrend line.

And once traders find that Bitcoin seems to have successfully broken through the downtrend line, many traders will close their short positions and even switch to long! This behavior of traders will further drive up the price of Bitcoin.

Therefore, we can see that after a false breakout of the downtrend line, Bitcoin surged to 88500.

So why did Bitcoin $BTC fall sharply after the surge?

The reason can be summarized as: nearing resistance, selling pressure surges.

Near Resistance:

To express this more intuitively, one can refer to the Fibonacci retracement sequence in Figure 3 (from the highest point of 110000 to the lowest point of 76500).

We can see that the 0.382 level, which is 89150, is a significant resistance level for Bitcoin's rise. Last week, Bitcoin's price approached this resistance multiple times and started to fall after failing to break through.

Selling pressure surges:

And once Bitcoin $BTC shows weakness during the surging process.

So this time, smart money began to sell their holdings right before Bitcoin approached the resistance level.

We can see that Bitcoin rose to its highest point at 4:15 AM (UTC+8), after which the buying power in the spot market sharply decreased.

Immediately afterwards, more and more traders noticed the signs of Bitcoin's sharp decline, and spot trading began to be sold off in large quantities.

Meanwhile, less experienced retail investors, seeing Bitcoin break the downtrend line and surge, eagerly jumped into long positions after Bitcoin's pullback. These latecomers fell victim to liquidation or market stop-loss after Bitcoin's sharp decline, becoming fuel for another drop in Bitcoin.

How to survive in such extreme market conditions?

In extreme market conditions with double explosions on both sides, the most dangerous practice is blindly chasing highs and cutting losses, becoming the "fuel" of market sentiment. In the face of such conditions, traders should pay attention to the following points:

1. Do not be misled by the market's false moves: false breakouts and false breakdowns are common washing methods used by main funds. Do not immediately chase orders upon seeing a breakout; instead, observe trading volume and K-line patterns to confirm whether the breakout is valid. 2. Strictly set stop-loss: In times of extreme market volatility, stop-loss is the only tool to protect funds. A clear stop-loss position should be set before opening a position to avoid repeated market harvesting. 3. Avoid high-leverage trading: In extreme market conditions, significant fluctuations in a short time can lead to liquidation of leveraged trading accounts, so controlling leverage ratios and capital input proportions (I believe the maximum position should not exceed three times the principal) is particularly important to reduce position risk. 4. Patiently wait for key support or resistance reactions: Instead of chasing highs and cutting losses, it is better to observe market reactions at key support or resistance levels and wait for clear signals before trading. 5. Stay calm and avoid emotional trading: During extreme volatility, many traders are easily driven by fear and greed to make wrong decisions. Learning to control emotions is essential for long-term survival in the market. In extreme conditions, it is often not those who make quick money in a short time that survive but those who understand risk control and wait for opportunities. I wish all friends steady progress in the market!!