Illuminating the “Bart Pattern in Bitcoin”: The Momentum Ignition Algorithm
If you’ve paid attention to BTC prices within the past months, you would have surely noticed some pumps or dumps that occur within a short time interval, causing price action to find a new high or low for a short period. Crypto traders have called this pattern the Bart, although in traditional marks it is known as the “diamond reversal”.
This price movement is unnatural, as it is unlikely that this rise in demand occurs independent of bullish news events and moving day averages, thereby raising questions as to whether high frequency traders are utilizing momentum ignition algorithms.
Momentum Ignition Algorithms
Momentum Ignition Algorithms function by causing a sharp spike either buy or sell action, thereby enticing traders to follow suit. Following this trend, more traders will place buy orders above significant zones expecting a trend reversal, and short sellers will place stops losses in similar areas, these are effectively buy orders. In order for the algorithm to be most effective it has to push price into these liquidity zones, triggering buys, and from there it can disengage.
The effect on market participants
- The traders who jumped in at the tail end of the ignition have been significantly…
