What Is the Accumulation Phase?
The Accumulation phase is the stage at which the institutions anticipate great potential in undervalued security and start building up their position. They cannot buy their entire position in one single order as the volumes of the security would shoot up, resulting in the market noticing unusual activity. Therefore, they buy these securities in tranches to avoid getting detected by the market participants. At this stage, the security has been under a strong downtrend, triggering a bearish sentiment around it causing the institutions to be able to buy the security at a very attractive price.
What Is a Market Cycle?
Originally derived from the stock markets, market cycles are repetitive patterns or trends that are formed in financial markets. There are four main stages that are part of a regular market cycle: accumulation, run-up, distribution and run-down. These four cycles are always seen in the same sequence, which is why traders aim to detect stocks in the accumulation phase to be able to buy the asset before it starts its uptrend.
During the accumulation phase, the selling volumes are almost flattened as the majority of the sellers have exited their positions. Due to the bearish sentiment, there is a lack of buyers that makes the asset trade sideways, and this is when institutional investors step in. They take advantage of the sideways trend and start accumulating the security in small loads without indicating to the market - it helps keep the price at a discounted level.
It is important to note that an accumulation phase can be mistaken for a distribution phase, which is seen right before the decline in a stock. This is why investors should be cautious and make sure they research properly and wait for a clear breakout as a confirmation.
Trading the Accumulation Phase
The accumulation phase tends to form clear swing highs and swing lows. The only downside of swing trading security in the accumulation phase is that the range might be too tight, causing the profits to be limited.
Check out our guide on scalping vs swing trading!
The accumulation phase has no set time period as to when it could break out and start the run-up phase. This attracts value investors as they have the patience that traders may not since the accumulation phase usually goes on for over a year!
Traders prefer to add securities that are in the accumulation phase to their watchlists as they would enter once a clear breakout occurs. They prefer doing so as securities may even spend multiple years in the accumulation phase. Therefore, rather than parking their capital in a sideways trend, traders look for better opportunities.
Example of Accumulation Phase
In the weekly chart of Spotify above, we can clearly see the accumulation phase.
The accumulation phase started after a strong downtrend, which took Spotify from $195 to $100 - the level where the market bottomed out. At this point, investors started accumulating their position in Spotify.
As we mentioned earlier, the accumulation phase can last for a longer period as well which was the case for Spotify as it consolidated from 2019 to mid-2020. Traders would have stepped in once a breakout was seen in May 2020, however, they would have had to buy Spotify at a higher price of $200 as compared to value investors who got to accumulate near $100 to $140.
What Is a Faucet?
A crypto faucet is a reward system which allows users to earn free, usually small, rewards in crypto for completing certain tasks. The tasks typically involve viewing ads or completing captcha tasks. It is considered an effortless way to earn crypto assets which doesn’t require any expertise unlike cryptocurrency trading.
Bitcoin faucets are unsurprisingly one of the most popular forms of faucets. The first faucet, called “The Bitcoin Faucet,” was developed in 2010 by Gavin Andresen, a software developer known for his contributions to Bitcoin. It gave out five whole BTC for completing small tasks like captcha completion or as rewards to simple games.
After cryptocurrency prices rose in 2019, payouts from faucets have become increasingly low. Faucets tied to the likes of Ethereum, Dogecoin and Litecoin later emerged to incentivize purchases of these altcoins, which are cryptocurrencies created after Bitcoin. Nowadays, faucets are typically used to distribute gas tokens in testnets or new blockchains, so as to allow users to interact with the applications.
Most faucet rewards are paid directly to a user’s wallet or whichever third-party wallet is being used. Faucets should not be mistaken with airdrops and bounties, which are also other ways of achieving cryptocurrency rewards. Airdrops are usually distributed by new projects seeking to incentivize or reward early adopters, while bounties are rewards given to anyone who discovers bugs or vulnerabilities in the project’s code, sometimes known as white-hat hackers.
What Is an Ethereum Transaction?
Ethereum transactions are cryptographically signed instructions from accounts, where an account will initiate a transaction to update the state of the Ethereum network. The simplest transaction is the one that occurs from one ETH account to another.
In the world of cryptocurrencies, an Ethereum transaction is the action that is initiated by an externally-owned account, or in other words, one which is managed by a human, not a contract. If Johnny sends 2 ETH to Jim, Johnny's account has to be debited and Jim's has to be credited. When this state changes, the action takes place with a transaction.
Now, based on Ethereum's rules of consensus, the network agrees the transaction is a valid one, and then it gets included in a block that is added to the blockchain itself.
The message that makes up the transaction is an RLP-encoded array that has the ability to specify the details of the transaction itself and has values such as the recipient, the value, the data, the gas limit, the gas price, the nonce and the signature.
The recipient is the account address to which the transaction is actually sent.
The value is the amount of Ether to transfer from the sender to the recipient, and this can even be zero.
The data is an optional arbitrary binary data, where throughout the contract deployment, the contract's bytecode is sent.
The gas limit is the maximum amount of gas that can be consumed by a transaction, while the gas price is the amount the sender will pay for each unit of gas. A nonce is a sequence number, which is per sender and has to match the next available sequence number. The signature is data that identifies as well as authenticates the transaction's sender.
What Is UTC Time?
In the context of cryptocurrencies, the crypto world runs on UTC.
In contrast to most financial exchanges, cryptocurrencies operate on a 24/7 basis.
Using a standardized time simplifies things greatly as cryptocurrency users are located across the globe and are trading in different time zones.
According to CryptoHash, 12am to 1am UTC is one of the most volatile hours for Bitcoin — and this may be because this period reflects the start of the evening in North America, and the beginning of Asia's working day.
Traders across all assets, including cryptocurrencies, often look to Asian markets for direction and often base their positions based on movements on the continent.
Another study by Forbes Digital Assets in 2019 identified 4pm UTC on a Wednesday as the most volatile timeframe for BTC across several exchanges.
The research found this time was 36% more volatile than the average of all time periods.
The research said this may have to do with the fact the time is right in the middle of the US working week.
On the other hand, the research identified the hours between 8am and 10am UTC on a Monday to be 35% less volatile compared with the average.
What Is Bluesky Crypto Protocol?
The Bluesky crypto protocol is a decentralized social network protocol, organized by Twitter, that allows several social networks to interact with other social networks, thanks to an open standard. These networks, which are all communicating with each other and have their own moderation and content curation systems, are called "applications."
Bluesky has been compared to IPFS, a P2P filesharing protocol, and Basic Attention Token (BAT), a token incentivizing ad-watching on the Brave browser.
Who Founded Bluesky Crypto Protocol?
The then-CEO of Twitter, Jack Dorsey, announced the Bluesky initiative in 2019 on Twitter. Parag Agrawal, CTO at that time and CEO of Twitter as of October 2022, invited the first batch of working group members at the beginning of 2020. Jay Graber of the Happening decentralized social network joined the Bluesky initiative as project lead in August 2021. She was tasked with composing a technical review of the decentralized social network sector.
What Is the Connection Between Bluesky and Twitter?
Besides being backed by several current and former Twitter executives, Bluesky's goals and scope are approved by Twitter. This refers to the applications that are part of the protocol and the goals of Bluesky. It aims to allow applications to customize their moderation system and make them responsible for compliance and takedown requests.
Furthermore, applications are to prevent algorithms that reinforce viral loops based on controversy and moral outrage. However, there is still no common consensus on how to achieve this.
What Is the Impact of Elon Musk's Takeover of Twitter on Bluesky?
Even before Elon Musk renewed his commitment to buy Twitter, Bluesky clarified that it was independent of Twitter and registered as a public benefit limited liability company since February 2022. This gives Bluesky the freedom to put its resources towards its mission without an obligation to return money to shareholders. The team owns the Bluesky initiative, meaning Twitter has no controlling stake in the company. Furthermore, it has $13 million in funding.
Bluesky also stated that it would "work towards our vision of a durable protocol for public conversation no matter what happens." Elon Musk has repeatedly vowed to fight spam bots on Twitter and toyed with the idea of introducing crypto payments on the platform.
What Is the Bluesky R&D?
Bluesky released some code in May 2022, publishing a command line for testing, an experimental personal data server, and a high-level overview of the network architecture. It aims to allow individual users to transfer their data between applications, enabling user-owned data in contrast to the company-owned data standard to web2 social networks.
What Is an Altcoin Trader?
Altcoins refer to any cryptocurrencies that are not Bitcoin, and are seen as “alternatives” to Bitcoin, hence the name. Altcoins are blockchain-based but use different consensus mechanisms to validate transactions. Typically, altcoin developers may advertise their token to be superior to Bitcoin in some way (such as a faster transaction speed, cheaper transaction fees and so forth). Various altcoins compete with Bitcoin for market capitalization hoping to overtake Bitcoin’s top position someday.
A few of the more well known altcoins include Ethereum, XRP, Litecoin, Cardano and Dogecoin. Altcoin traders generally trade large volumes of altcoins by the day seeking short term profits. Unlike HODLers, who intend to buy altcoins and keep them for years to come, altcoin traders aim to strategize based on real time news and anticipate optimal timing to realize greatest potential gains, but can incur big losses instead. Altcoin traders attempt to capitalize on the volatility and price fluctuations that a cryptocurrency (specifically altcoin) may undergo in a short period of time.