Hello everyone! This is my personal experience sharing about market structure or how the phases of the market occur to understand more deeply how market makers accumulate stocks, while also swimming alongside whales to optimize profits. This article has been in preparation and research for nearly 2 weeks now!
Part 1: Market Phases
If we talk about crypto, many people have probably heard terms like stock accumulation, breakout, redistributing stocks back to the market… So where does that come from? Or we often hear Ryan say that whales need time to accumulate stocks to push prices up; many people get trapped, and if they finish accumulating, they push it up to create liquidity and allow whales to take profits. So to gain knowledge about market awareness, what should we rely on? ==> That is market structure! So what can market structure tell us? Understanding it clearly will help us in what way? All will be shared in the following sections----1/ Structure/Market Phases in Crypto (Market Structure) In investing, there are always 3 phases; understanding these phases is very beneficial. Surely you have encountered cases where you use indicators to get a signal, a beautiful entry but didn’t pay attention to the overall trend, which led to a loss. I have faced this myself; that's why I researched market structure to understand more about trends! 'Trend is friend' will always be a support for traders! Let’s dive deeper together:
Stage 1: Accumulation:
This may be the stage that frustrates many people the most. There are no strong waves, and it sideways for many days, weeks, or even months. Simply, no one wants their capital to be buried for too long in a coin that doesn't provide any real profits!
Those who manipulate and set market prices must accumulate a large enough amount of coins. They must ensure they have enough stocks because if not, when they pump strongly, there won't be any coins left to sell.
Next, the accumulation period must be extended because you cannot accumulate enough in a short time. At the same time, the prolonged accumulation process causes people to become discouraged and sell off.
Releasing a lot of bad news about the market, economic, political FUD… causing investors to panic.
==> This is the stage where everyone trading has already taken profits, and those holding have also sold, trading volume is quite dull, tokens/coins are all in the hands of the whales. (A little later, there will be an example for easier understanding)
Stage 2: Growth:
This is a phase of clear trend formation when breaking support/resistance sideways for a long time. At this time, a lot of money flows into the market. There will be 2 cases:
+If the trend is up: Peaks and troughs will gradually rise
+If the trend is down: Peaks and troughs will gradually lower
This stage is a factor that helps market makers attract new investors, new money flows in to have liquidity when reaching the take profit point 'distribution' which can sell off. During this time, there will be good news about the market, economy, politics… or technical indicators will be 'super beautiful' super trending creating a sense of FOMO for investors. If you don't buy, the coins at low prices will run out.
Witnessing the significant growth in 2021 to see it more clearly.
Stage 3: Distribution
This is the stage when whales have pushed the price up high, which is the time to take profits. The sell-off period can last a few days or longer, identifying the distribution phase is also very simple through high volume 5x to 10 times compared to when it was sideways. When investors are FOMOing, liquidity is at its highest; at this time, market makers will gradually sell off, slowly without rushing. Because 'liquidity' is what determines whether whales profit or not! Or conversely, if the trend is down, they will find ways to buy back at lower prices; whoever short-sells will pay the price!
Example: Illustrated in the image
After each accumulation => Growth => Distribution process, this cycle will repeat. This applies not only to crypto but also to any field.
Example illustration on Trading View
Figure 1: To explain the accumulation phase, CTK is the most appropriate: Looking at the image, we can see that the price has been in the range of 0.7-1$ for a long time. When it touches the support at 0.7$, it bounces up and hits the resistance near 1$, then goes down. It seemed that when enough stocks were collected, there would be a strong pump and it would soar, but many people got trapped when it broke 1$ (at this point, boss Ryan called it) and the price started to hover in the range of 0.7-1$ again. It shows that the actions of the whales are to accumulate enough stocks, making traders and holders frustrated and sell out before pushing the price further.
Figure 2: Looking at BTC's history, we can see the historic breakout, rising from over 3k$ to >60k$. Many altcoins also increased by 10x to 100x. This is typical of a growth phase. Broadly, the entire market, smaller, then the waves of breakout push the price and then sell off.
Figure 3: A smaller example of growth through the APT chart. After a few days of listing, the price of APT dropped sharply, after accumulating enough in the range of 7-8$, there was a breakout to 10$. The volume was also very impressive.
Figure 4: According to structure, the distribution phase is for taking profits and selling off. BTC reached the take profit point, and bad news continuously came out, causing panic in the market. Anyone who was around in May 2021 would understand. Anyone margin trading or in futures would be in deep trouble.
There is a very interesting note; when the distribution phase occurs, there may be another peak of 69k$ right? The reason is that after distribution, time is needed for accumulation to continue distributing (there may still be stocks not fully sold), so two peaks appear in trading (similar to the head and shoulders pattern that traders often apply)
Thus, we can understand how the structure of the crypto market works, right? Quite simple, isn't it? It can be applied to catch the main trends that occur. You can also take a look at boss Ryan's stock accumulation process for more illustrations (YouTube link below the comment to avoid being spammed)
==> Through market structure, I can summarize the process of stock accumulation of whales simply through the OP Chart as follows:
Step 1: Accumulation: Whales accumulate in batches, creating small waves to offload stocks over a long time, for example, OP in the range of 0.4 to 0.7$ previously. Price action is when it drops to support, then bounces back up, and when it hits resistance, it drops down again.
Step 2: Pumping the price: After accumulating enough stocks, it's time to pump, OP has increased 4x.
Figure 5: Illustration of the stock accumulation and price pushing of OP.
Step 3: Sell/take profits: This is when people take profits, especially the whales. Volume remains high enough to have liquidity for selling. The two peaks of 1.9x$ and 2.2x$ are textbook examples in market structure after taking profits will lead to another round of distribution before dropping deeper.
*A small reminder: no prediction can guarantee what the market will be like tomorrow! So this article does not encourage long/short trading!
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Part II. How to follow the whales?
Crypto whales is a term used to refer to individuals or organizations holding a large number of a particular coin or multiple coins. From there, they can influence the market in the direction they want to profit. The role of whales is also very important in keeping the market vibrant and flourishing!
Whales or funds, when participating in the market, are not 100% sure they will win; they can also incur losses after accumulating stocks and pushing prices ineffectively. We are the same; not everyone incurs losses when manipulated by whales; we can 'go with the flow' and profit alongside the whales. So what do we need to identify and follow the whales? How do we prepare to avoid falling into the psychological traps set by whales?
Firstly: In all my writings, I always emphasize mindset and experience because that is the best and most sustainable way to earn profits from this market. Whales are giants; we are small players, and we cannot use our own strength against the giants but must follow in their footsteps 'Follow the big player'. Nothing can change except for changing ourselves!
Secondly: After having a mindset about how whales and market makers operate, learn more about how they do it! How do they leverage the crowd?
+ To know this, one must clearly understand the process of accumulating stocks and pushing prices through market structure; when seeing the accumulation actions of whales, choose a good position for yourself and be very patient because accumulation is not a short-term endeavor. Pay attention to where investment funds are pouring money, where the money is flowing into ecosystems or trends!
+ Additional knowledge encouraged: Price Action, Research skills, checking on-chain… (This can be elaborated in future posts, as the main content of this post is about market structure, so I don't want to stray too much)
+ The distance from: Knowing - Understanding - Applying - Profiting is very far, requiring time with the market. It is not something that can be done in a day or two. Therefore, one must focus on the market continuously (in my previous article, I discussed the mindset of closely following the market) so that when the market is pushed, they do not miss it due to a lack of information and sensitivity.
Thirdly: Learn more about the market, understand the nature of price action. While learning, you need to prepare 2 mindsets before going to school:
The first mindset: Always categorize knowledge; it may be useful for one person but useless for another. There are 3 types of knowledge that people in the group often share:
+Type of tricks: tips, tricks, methods, processes,... Can be applied directly in trading
Example: Tips to follow the whales, trading tips…
+Type of mindset formation: Mainly theory, prompting individuals to draw their own conclusions, providing perspectives. Or the types of knowledge 5W that I often share: What? Why? Where? When? Who?...
+Type that helps you to boast: Not applicable in the market but helps you boast better
The second mindset: You must filter knowledge; not 100% of knowledge from experts is suitable for you. The important thing is how much you can absorb and apply to the market after learning.
- Additionally, when fully prepared with knowledge and processes, sometimes just your own sensitivity is not enough; you need additional analytical websites or tools to track whale actions like cryptoqant, Defilama, Whalemap.. to catch the direction of the whales in time.
** Important notes
+ Volume is really important; we can win thanks to volume and can also be trapped just because of volume! Observe and learn more about it.
+ Trends say it all. Buying in a downtrend significantly increases your chances of getting wrecked. 'Trend is friend' is a very accurate saying
+ Everything is relative! You can't win 100% of the time, so if you incur losses, don't be too discouraged. Focus on experience and knowledge to increase your win rate.
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Part III: Conclusion
So I've finished the article about market structure and the steps to follow the whales! Always stay alert before making any investment decisions. Equip yourself with the right knowledge to earn in this ruthless market without relying on anyone! Wishing everyone a profitable December and a plan for the upcoming 2023. See you in the next article!
