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"Why is crypto rallying is another one the most frequently searched question in this industry. Believe it or not, but the reason why crypto rallies tends to be the same regardless of crypto in question.
In the short term, the primary reason is a short squeeze, usually triggered by a bullish crypto catalyst, a bullish macro catalyst, or a combination of both. Understanding this dynamic is important to stay calm.
This begs the question of how you can know if a rally is the real deal. The answer depends on the macro and crypto circumstances that caused the rally. Today, we tell you a bunch of rules of thumb to follow.
Enjoy!"
~ Coin Bureau
The video explains that cryptocurrency market rallies are driven by a combination of bullish macro and crypto catalysts, as well as leverage-driven events like short squeezes. A short squeeze happens when traders who bet on a price drop are forced to buy back crypto as prices rise, pushing prices even higher. This can create a positive feedback loop, especially when combined with high buying volume on spot markets. The video also notes that large traders, known as "whales," can manipulate prices to trigger short squeezes and cause FOMO (fear of missing out), pushing prices above key resistance levels. To determine if a rally is genuine or a "bull trap," it's crucial to analyse both the leverage involved, by using sites like CoinGlass, and the broader market conditions.
To assess whether a crypto rally will continue, the video suggests a two-part approach: examining macro and crypto conditions. For macro conditions, you should look at major stock indices like the S&P 500 and Russell 2000, as well as US bond yields and the US Dollar Index (DXY). Bullish signs include rising stock indices and falling bond yields, or a weakening DXY. For crypto conditions, the health of Bitcoin (BTC) is the primary proxy. If BTC is in a clear uptrend, it's a good sign for the overall market. The video also explains that a rally may be ending if bullish catalysts fail to move the price higher, or even cause a sell-off, which can be a red flag for a potential market top. Finally, the video discusses "rotation" of capital between different cryptocurrencies, noting that this process is often more complex and leverage-driven than it appears.
0:00 Intro
0:27 Crypto Short Squeeze Explained
4:40 Bullish Macro Conditions And Catalysts
8:19 Bullish Crypto Conditions And Catalysts
12:32 How To Tell When A Rally Is Over
15:42 Crypto Rotation Explained
Source - Coin Bureau YouTube: https://www.youtube.com/watch?v=tkJ_nCZVO-8
Disclaimer: This video is provided for informational purposes only, and not offered or intended to be used as legal, tax, investment, financial, or any other advice.
