Whale watching in the alt markets
Recently I discovered a new indicator. It is called On Balance Volume and what it does is to show you if a trend is supported by volume. It does that by adding up the volume of intervals with a positive price movement and substracting the volume of intervals with negative price action. If there were 3 days with positive price movement and high volume, the OBV indicator goes up together with the price. If the volume declines while the price is going up, the OBV indicator stays flat. If the price goes down on low volume the OBV indicator stays flat as well.
Lets take the VEN/BTC trading pair for example.
I overlay the OBV indicator as thin blue line aver the price shown in thick black. What you can see is that the run up in price at the end of last year was supported by a rising OBV line. This indicates that the run up was supported by volume. In January the price of VEN was declining. As always the price declined due to higher supply than demand, but as can be seen by the flat OBV curve there seems to be absolutely no demand that anyone can sell into. Volume is what can only produced by whales. Normal traders can't move the market with their tiny orders. I assume that on the way up whales grew their positions but on the way down they were stuck. The market was unable to absorb any sell orders so the token are still in the hands of the whales, waiting for a good moment to exit their positions. While retail traders sold into the decline the whales have to hope to be able to pump and sell into rising demand from the retail side.
Lets have a look at the Bitcoin chart throughout the last year.
You can clearly see that the OBV is rising up with the volume until June 2017 but suddenly it went sideways and the price still moved into the direction of the prior trend. Everyone remembers the frenzy that kicked in in November when it became clear that Bitcoin Futures will arrive at Wall Street and a glorious FOMO was driving retail investors into the market. I say the whales already made their bet before June and sold into the strength f the market. In contrast to the VEN chart we can see that the price decline in BTC was accompanied with volume. Lots of bad news made the price plummet from the all time high. China banns mining, Korea halts trading, Tether is under inspection by the feds. Lots of respected and influential media outlets and people posted publicly their opinion that Bitcoin will go down to zero. All this while the wales kept on selling and the retail traders tried to buy every dip only to get stopped out by the next wave down.
So what do we make of this? IMHO we will likely see a exit pump. And this pump will be led by a slowly and steadily rising Bitcoin price. This will create perfect conditions for alts to rally once again. And this is where the whales that control the Bitcoin price are waiting to sell into the retail traders that have to take it from them. What coins will profit? most likely all the coins that have some big whales sitting in them like VEN.
The ADA chart can be seen as controversial because it can be seen that the highest buying power was witnessed in only one week in late November. Maybe there was too much trading back and forth for my thesis to be applicable to ADA. But on the downswing almost no coins were traded.
Another good one seems to be IOTA from this perspective.
Stellar Lumens seem to be added to the stash even on the downturn. Accumulation is usually the first phase of a assets price cycle according to Mr Dow and Mr Elliot (Waves).
EOS might be a true gem after all.
While Monero still looks like a decent bet.
There are examples of coins where the whales seem to be out already. This is true for Ripple as can be assumed from the following chart
... same goes for Tron
... or NEM
I would love to find more hints on coins that follow this pattern in the comments below, as I plan to invest according to this strategy in the coming days. My time horizont on the trades is up to 6 months and I expect the coins to pick up after Chinese new year settles around February 20-25th. If my advice helped you make some money you are welcome to tip my post on Steemit or using Bitshares with the same account name "happy-goldberg".
Happy trading!
Wow this is pretty interesting. Thanks for sharing. I'm about to leave my house so I don't have more time to spend on this but I was curious about a couple things. As far as EOS goes how to you think the on going token sale factors into this data? Also why are you only using two tags in your post? Seems like you could get more exposure using all 5. Cheers!
thanks for mentioning the tags. I just didn't know what to tag it with and only the first tag decides about the category. I have little thought how the token sale factors in with eos. At least it means that the launch of the network will create a lot of buzz. anything that moves attracts more money in crypto. And energy efficiency will become the main topic later this year. all good factors for sustainable growth of eos. I have to say that i was sceptical about eos and valuations. but they are making progress, address the pain points and can be seen as a upgrade to the only blockchain products i seriously use today: bitshares and steemit. of all the platform coins ethereum has a the biggest ecosystem, but by moving the existing graphene products over to eos the only other coin with a existing ecosystem will be eos. this could play out like microsoft windows sustained growth with backwards compatibility: old windows software will always run on new windows versions. You can get the new benefits but can bring your old habbits. they broke with this principle in Windows RT and it flopped. Its a powerful incentive.