Analysis of the underlying logic of the current market research of the crypto market

The crypto market is not an equilibrium market, but a market that is always on the deviation.

Analysis of the underlying logic of the current market research of the crypto market

There is nothing above the fundamental situation that has changed recently, and the variable factors of the market have not emerged. So you will see that our strategy will not change for a long time dimension. This is of course one of the reasons why our market analysis is updated less frequently.

At the same time, because we are in a certain sensitive period recently, the major public numbers and VX group wind, so we will temporarily adjust the release time of the market analysis to Monday, Wednesday and Saturday (except for special circumstances). Monday and Wednesday to market analysis and technical, strategic short article, Saturday to long article, mainly about the theory of investment and directional, trendy things, designed to help you clear direction, do not have the wrong illusion.

Today we’ll talk about the current trend and give a directional characterization of the current market.

Because for a long time before recently, including many of my friends around me, we all still have illusions about the current market. Although we characterized early that it is now a structural bear market phase, we still have big illusions about the rebound or even reversal, and still can’t let go of our positions or operate at low and high frequencies. So today we do not analyze the quantitative and qualitative aspects of the market from the perspective of the previous technical analysis, strategy theory. We dissect the relationship between trends and bubbles from the perspective of the market’s trend inversion.

Before doing theoretical research, we must do a theoretical premise for the theory of doing research. This theoretical premise is that advance hypothetical quantity inside mathematical research and scientific research, for example, we often assume in mathematical research that its basic unit quantity is the same as 1 or 100.

Before I write about the assumed quantity, I must warn that today’s stuff may be quite brain-burning or require certain cognitive skills, otherwise maybe you will look at it in a cloudy way. But again, I have to go into the reason for this because this cognitive underpinning determines the premise of our investment guidance.

First of all, we do not see the cryptocurrency market as a stock market (the stock market has a theoretical premise around value and price fluctuations, and we can study and analyze around value and price in our analysis), and certainly not as an exchange rate market (the exchange rate market has a premise around interest rates and price fluctuations of exchange rates, and we can study and analyze around supply and demand of currency in our analysis), much less as a commodity futures market (this is basically the expected supply and demand analysis of commodities).

So naturally, the theory of analysis cannot be applied to these markets for guidance, but their markets can be used as a reference. Since they are not universally applicable to the cryptocurrency market, we cannot directly take their theories and apply them to our analysis, which creates one of the most difficult thresholds in our analysis – what theoretical premise do we set as the premise of the cryptocurrency market analysis?

We all know that there is a lot of immaturity in the crypto market, even a big hype bubble, so we are in a very immature market, and in the face of immaturity, we think that the incomplete understanding of the participants is the central issue that we should assume, that is, the hypothetical premise of the study, and the reason for the incomplete understanding of the participants is that they influence the context that is associated with it. Incomplete understanding is a very difficult concept to operationalize; there is a lack of correspondence between the participants’ thinking and the context to which it relates, but this lack of correspondence is difficult to define, let alone measure.

The notion that a participant’s thinking is a part of the context to which it is related and that the concept of correspondence itself is inappropriate for describing the relationship between parts and wholes is a concept imported from the natural sciences and philosophy. In natural sciences, facts and statements belong to their respective worlds, while in philosophy, correspondence is the criterion of truth, but this analogy does not apply to thinking participants, because in crypto markets correspondence is too complex for thinking participants causing the analysis to be non-linear. To simplify the problem, we use the notion of inherent bias of the participants, and since bias is inherent, just unbiasedness is unattainable.

Today we cannot define and define the relationship between the participants’ thinking and the context in which they are involved, let alone make their functional relationship clear, because it is meaningless and difficult to understand for everyone, so we will do the analysis on the facts.

Because there is a problem with the perception of the participant and the perception of the participant by the context, we characterize the crypto market as a cognitive bias market influenced by the interaction between the participant and the context, and therefore we believe that the crypto market is not an equilibrium market, but a market that is always on the wrong side. We argue that its valuation is always distorted, which is a decisive departure from equilibrium theory – but that this distortion has the power to sway potential value.

If we define a market as one in which participants and participant contexts interact, then there are only three variable factors in this analytical scenario – price, fundamental trend, and prevailing bias.

If we assume that many of their biases cancel each other out, what remains is what I consider to be the “dominant bias”, which is the main market bias influencing factor in our analysis.

The movement of prices either positively pushes and strengthens the fundamental trend, or negatively acts to weaken the fundamental trend to correct itself. When the trend is reinforced by the price, the trend accelerates, the consensus of the dominant bias is strengthened, and the future price will be greater than the expected price (both positive and negative).

Conversely, when it self-corrects, this difference shrinks. We can understand that when the fundamental trend is formed, the prevailing bias is interspersed with a lot of speculative activity (but in reality most of the activity is speculative, for example, contract volume can be seen as a speculative indicator).

First of all, we must be clear that speculative activity is unable to re-establish the balance, but rather it will strengthen the basic trend, when the speculative trend to get a profitable result, the proportion of this speculative weight will also grow and is self-reinforcing accelerated growth, the basic trend into self-reinforcing trend will last longer, the mainstream bias of the consensus will be stronger, this is the logic of the formation of the trend inversion.

And at the same time, once the trend has been established and strengthened into a cycle, it will often continue for a long time until the appearance of a turning point, after which a self-reinforcing process is initiated in the opposite direction. Therefore, once a trend is formed, it is very difficult to change it and will maintain the direction of movement for a long time. And about the end of the trend and change, this is actually a relatively easy to judge things, it is often accompanied by the impact of policy, policy affects the main variables of the market factors, such as the supply of money, etc., the market in the short term, violent repeated shocks, the market resonance of the mainstream bias to disrupt become very divergent, while the market speculative indicators appear to weaken and be harvested state.

It can be broadly understood that when a long-term trend gradually becomes strong, there will be violent fluctuations in non-trend variables, violent price fluctuations, violent fluctuations in the mainstream thinking bias, speculative indicators appear forced to weaken signals, etc.

There is no way to exhaust the theoretical discussion about this theory today. But there is one point that I believe we can all appreciate: what is the current trend? Is there a possibility of a rebound or reversal? The market is in a self-reinforcing trend cycle, you taste, you fine tasting. This is why we told everyone a long time ago not to report any illusions about the core underlying logic.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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