Why Crypto Markets Spend More Time Ranging Than Trending Key Highlights
• Crypto markets tend to spend most of their time ranging in prices, rather than trending.
– This is because of the dynamics of liquidity, the mechanism of leverage, and the value discovery mechanism.
- This knowledge may assist traders and investors in achieving a common goal of understanding market signals.
Market Auction Theory and Value Discovery- Markets are for trade and value discovery, not to just keep on going up or down.
- The price fluctuates between Value Area High and Value Area Low as it probes for the region where the forces of supply and demand are in equilibrium.
Institutional Behavior- “Large players prefer a stable environment and exhibit behavior within a ‘range,’ while increasing exposure while ‘liquidity is abundant.’”
- Ranges are action zones in preparation for future trends rather than indicators of indecision.
What to Expect – Crypto
The crypto markets will be dominated by a continuous regime of ranging, interrupted occasionally by strong trending episodes.
- This awareness of reality may also help traders adjust their strategies.
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