- Bitcoin’s ‘Bart’ trading patterns are here to stay, says Su Zhu, CEO of Three Arrows Capital
- Zhu blames liquidation cascades on derivative exchanges for the trademark moves
- Derivative exchanges became increasingly popular during the last bear market
Bitcoin’s ‘Bart’ trading patterns are “definitely” here to stay, according to Su Zhu, CEO of Three Arrows Capital, due to the influence of leverage trading sites. Luke Martin yesterday reposted a section of his interview with Zu for his Venture Coinist podcast in October last year, where Zhu explains why these patterns occur and why we won’t see the end of them for some time. The need for a reminder of what Bart trading patterns are comes after Bitcoin’s rapid ascent over and descent back below $10,000 this week, which some put down to a mining pool selling off thousands of BTC and others down the usual reason – liquidation cascades.
Bart Trading Patterns Manipulation By Any Other Name
Bart trading patterns are caused by liquidation cascades which occur when Bitcoin makes a strong move down, liquidating a number of people who were long. These liquidations act as sells, forcing the price even lower, causing panicked retail investors to sell in a panic, until buyers step in and stop the cascade:
In the interview, Zhu states that the reason why these patterns occur:
When there’s no clear direction or the market’s moving sideways, that’s actually the natural state of things, and then when people see an opportunity they can come and take advantage of pockets of illiquidity or…a way to get the price to move to a certain point.
This sounds, unsurprisingly, like manipulation, but Zhu says he doesn’t see it that way:
I actually don’t see that as manipulation. I see it as simply the fact that…the vast majority of Bitcoin is held off these exchanges, so a very small amount of Bitcoin that are out there are moving the price…I think that will continue as long as people allow themselves to be liquidated on these (2%) moves.
It is well known that most Bitcoin is held off exchanges by long term holders, with the Bart phenomenon being seen more prominently in bear markets when there is little other action for traders to enjoy.
Barts “Definitely” Here to Stay
Many have castigated the growth of margin trading platforms, blaming them for increasing Bitcoin’s volatility. The most famous example we have of how these platforms affect the price is when Bitcoin crashed 51% to $3,850 back in March on the back of issues on the BitMEX platform, which the company put down to a DDoS attack.
Zhu says these Bart trading patterns are “definitely” here to stay due to the popularity of derivatives exchanges, which he calls “the world’s best casino”.