The crypto market follows a particular method or should we say movement within certain periods.
There are two notable types of periods in crypto trading and each period always ends with a specific price movement for any coin involved.
At the end of each period, either the price of the coin moves up or it moves down.
The up and down movement of the price of a coin is determined by which of the periods the coin just went through.
The two periods are known as
- Accumulation
- Distribution
These two periods come together to create a never ending cycle that helps to determine whether the price of a coin will move up or down.
Knowing how to read and deduce the current period a coin is in can help to determine whether to buy or sell the coin
Accumulation
An accumulation period is simply, a period when most people are buying and holding on to a coin or asset with the hope that the price goes up and they can sell for a profit.
An accumulation move always ends up with the price of the coin going up.
On most charts, picking out a period of accumulation would just require that the trader look for a period where the price movement of the coin dropped low enough to a point and stagnated such that the price movement is now experiencing a sideways action within a certain range.
In the BTC_USD price chart above, we can say that the period/timeframe marked within the yellow marker is a period of accumulation.
The reason for that is because as it shown in the chart, the price for BTC against USD fell from 9670 USD to 9575 USD and has since moved up to be fluctuating between the 9633 USD and 9725 USD.
The period when the price stays between those two points, not matter how short or long is know as an accumulation period, which means people are actually buying the coin.
At the point where the number of buy orders for the has exceeded the number of sell orders the price of the coin might move up.
Distribution
Whenever the accumulation period of a coin has been exhausted and the price has moved up to its peak for that movement, distribution happens.
Distribution is the exact opposite of accumulation, a coin in distribution will experience a downward movement of its price.
Distribution happens right after accumulation stops and continues happening until accumulation starts again.
Let's take our earlier chart for example, the period where the price of BTC drops from 9670 USD to 9575 USD is known as the period of distribution
From the chart, you will notice that the price dropped and kept dropping until it got to 9575 USD and then it reentered accumulation phase.
That is the cycle that the market follows.
There are a lot of ways, strategies and indicators that can be used to predict price movement in the crypto market, but knowing how to recognize accumulation and distribution periods would definitely be of great help.
Buy when others are buying(Accumulation)
Sell when others are selling(Distribution)