There are three phases in a crypto market. They are as follows.
* Accumulation phase.
* Absorption phase.
* Distribution phase.
1. Accumulation Phase:
In the accumulation phase, regardless of the market trend, investors try to cause an imbalance by placing more buy orders. The price of the corresponding currency will not be affected, because when the trend starts, not many smart traders would join the momentum. The activity is felt only in the minority.
2. Absorption Phase:
In the absorption phase, gradually this accumulation activity starts reaching wider parts of the community. Now, every trader joins the trend and pumps up the volume. The circulation of the currency increases along with the massive inflow of buy orders.
3. Distribution Phase:
After the accumulation and absorption phase, the supply of the currency gets limited. Since the supply is reduced, the demand increases. As demand surges higher, so does the price of the currency. This is when the active trading community that took part in the accumulation phase gets back into play. They sell their accumulated currencies at a higher and reap the highest profit.
These phases are prevalent in the crypto market.
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