Who is selling? The truth is unexpected!

Overnight, Bitcoin continued to consolidate above 42k, and the market was ready to move. I saw a chart from glassnode that showed the buying and selling situation in the three major regions of Europe, America, and Asia, which reminded me of the controversial article "No Second Half at the End of the Year" on October 15, 2021.

The article was written just after the release of Document 924 and the leading exchanges announced the "clearance" of domestic users by the end of 2021 for risk aversion, and before the Federal Reserve's monetary policy shift in early November 2021, announcing the start of taper that month.

To put it in a nutshell, the central idea of ​​the article is to infer the situation of the long-short game based on the obvious fact of "clearance", pointing out that it is impossible for the main force to reach the top at the end of the year, allowing the leeks to "escape victoriously" (escape the top) before the "clearance" at the end of the year.

This is entirely based on game theory, or in other words, reasoning based on the internal factors of the market.

I do not speculate on possible changes in the Federal Reserve's monetary policy, nor do I draw any inferences based on such vague guesses (or predictions).

In my opinion, the Fed’s monetary policy is at best an external factor. The theory of contradictions has long told us that internal factors determine external factors, not the other way around.

Looking back at this bull market, a generally accepted narrative is that the main reasons for the two major market pullbacks were: the first was the market panic caused by the crackdown on mining in May 2021, mainly due to the fleeing of Chinese investors and miners from the market; the second was from early November 2021 to the present, when the Federal Reserve’s monetary policy shift, the implementation of taper, the acceleration of taper, and the early rate hike led to a series of actions such as the withdrawal of European and American capital.

In other words, the collapse in mid-2021 was caused by a sell-off in Asia, attributed to the crackdown on mining, while the collapse at the end of 2021 was caused by a sell-off in Europe and the United States, attributed to the Fed’s taper.

However, the data shows the exact opposite of this mainstream narrative.

The following figure is a statistical chart of transaction data in Asia, Europe and America. The red shadow is the transaction data in Asia, the above the middle axis is the buying order, and the below the middle axis is the selling order. The purple curve is the European region. The blue curve is the North American region.

(Figure: Transaction data of the three major regions of Asia, Europe and America)

The dark blue dotted box represents the period from the peak in November 2021 to the bottom at the end of January.

It can be clearly seen that after the first LPS pullback of Wyckoff in September, the buying in the three areas overlapped, resulting in a small top before November.

But it is obvious that in the wyckoff rebound from late July to early September, the buying power in North America was greater and stronger than in October. The former was more like the work of institutions and major players, while the latter was more like retail investors whose emotions were mobilized.

This resulted in the fact that before the peak in early November, although there was a superposition of buying in the three regions of Asia, Europe and the United States, it was still Asia (that's us) that bought more aggressively.

What helped to create the FOMO for the peak in early November was that just before the Fed announced the taper, the SEC took the lead in releasing the good news that the bitcoin futures ETF was approved for listing.

When this combined buying power was exhausted and weakened at the same time in early November, the market reached its peak. With the SEC's favorable news landing and the Fed's sudden announcement of an immediate taper, the market began to shed steam.

But the subsequent divergence in behavior between Asia, Europe and the United States revealed what was the driving force behind this collapse.

The differences mainly occurred around the end of 2021, that is, from around December 2021 to early January 2022.

We can clearly see from the data that as prices retreated, North American buying has re-strengthened, which shows that they do not particularly care about the Fed's taper or even the expectation of a rate hike.

At the same time, a super selling frenzy from Asia began, which reached its climax at the end of 2021.

As far as I can remember, a certain large firm even announced that it would charge regular account custody fees to the stranded leeks in order to expel them!

It should be said that this time we reaped a lot of benefits from the Americans, because Asia was selling at the halfway point, and only after we had sold out did North America react and start selling, reaching its peak at the end of January, precisely at the lowest point some time ago.

I wonder if the American investors, especially those who bought in at high prices after Wyckoff LPS, were really frightened by the sell-off? Because judging by the sell-off volume, it is clear that the institutions that bought in at a lower price before September did not sell in a panic.

The blue frame ends here.

However, this series of sell-offs has brought about a reflexive effect, leading to the second wave of sell-offs in Asia since February - of course, in terms of quantity, the chips that the leeks have at their disposal have been greatly reduced this time.

Europe and the United States have long since emerged from panic and have turned to buying again.

As for the "519" crash in mid-2021, in fact, it is also very clear from the chart. At the beginning, our miners did not sell coins in large quantities no matter how painful it was. Instead, North America sold off in large quantities in May and June, especially the small climax before May, which became an important force to crush the top of the first wave.

Looking back at the articles at that time, "V God wields the sword to kill the dog" (2021/5/13), Vitalik was selling coins and dumping the market, instructing the Ethereum Foundation to ship at a high price, and "Musk, the Changeable Elon Musk" (2021/5/14), Musk sold coins and dumped the market in the name of environmental protection. His demonstration effect triggered more European and American institutions to follow suit. I have the impression that a hedge fund later disclosed complacently that it entered the market before the bull market started, shipped 60,000 dollars, and made hundreds of millions of dollars in a few months.

On the contrary, it was around July, when the last hope of our lovely miners was completely shattered, that the selling pressure in Asia increased (Europe also followed suit). What was North America doing at this time? It had already turned to buying and took away all the coins we had sold at the lowest price!

I won’t go into detail about what happened before.

Why do we need to look at the data again and seek attribution again? Because this will lead to different inferences about the future market:

If we agree with the mainstream view that the collapse at the end of the year was caused by the Fed's taper and the expectation of rate hikes, then the Fed will continue to raise interest rates and even shrink its balance sheet. Can the market outlook be good? Probably not.

If the end-of-year crash is caused by the Asian market withdrawal, then after the Asian leeks have been cleared out and the bottom price has been cut, will the main force clean up the house and then open the door to invite guests again? Will the market outlook be good? It is very likely that it will be better.

Don't be superstitious about mainstream narratives, don't blindly believe other people's analysis, think independently and you will see the truth.

(Official account: Liu Jiaolian. Knowledge Planet: reply “Planet” to the official account)