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Supply imbalances occur when demand rises too fast and the available supply fails to accommodate it. This causes a significant spike in the price that leaves gaps as normal price discovery goes out the window.
This happened back in November when Trump won the Presidential election as market participants were euphoric about the positive implications that this could have for the crypto space.
This gap has been mostly filled but a portion of it still hasn’t and that increases the downside risk for BTC as market makers could take advantage of depressed market sentiment to push the price lower and fill this gap.
After a bearish trend line breakout, the odds of a supply imbalance fill are now higher. We have seen a pattern of heavy selling during the weekend lately. If the price of BTC starts to drift lower starting tonight, this could mean that there is a coordinated attempt to fill this gap.
The reason why market makers do this is to take advantage of the buy orders that were not filled back in November as the price was rushed to all-time highs by Trump’s election.
As the supply imbalance gets filled, investors may have a clearer view of what the true trend is. If the market keeps dipping after the $70,600 level is hit, it could mean that BTC will keep heading lower as it is no longer technically relevant to keep pushing the price downwards.
Meanwhile, if the price bounces strongly once it hits this level, the odds that the bullish cycle that started back in November will resume will skyrocket.
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