The tripartiality of price

In the early hours of the morning, BTC quickly retraced from 60k to the 58k front line. The volatility of the secondary market often scares many people. The greater the volatility, the greater the fear. As a result, they often like so-called “stable” markets with low volatility, and naturally hate highly volatile markets, such as the crypto market.

The complexity of financial markets is that one single variable — price — overshadows all of humanity's mathematics. So far, the debate about whether price fluctuations are random processes with no memory or non-random processes with memory has still not come to fruition.

Teaching Chain believes that the reason why the price is so mysterious and complex is that it is ternary (ternary) — composed of three possibilities — rising, falling, and sideways, not binary (binary). Common in the macroscopic reality world is duality: yin and yang, black and white, presence or absence, male and female, life and death, switches,...

When it came to quantum mechanics, ternality began to appear. Schrödinger's cat can live, die, live or not.

Prices, like that cat, can rise, fall, or rise or fall.

It is this tripartiality of prices that makes the financial market complicated and unpredictable.

In Dream of the Red Mansion, Lin Daiyu said that either the east wind overwhelms the west wind, or the west wind overrides the east wind. This isdualismperspective. So is it possible that the east wind and west wind are evenly matched, and that no one can beat anyone, or that the two sides are dragging back and forth near the balance point? This is a game theory perspective.

The decentralization of BTC depends on constructing an elaborate game structure, so that at any level, multiple players check and balance each other, and no one can overwhelm others, take the lead, and control the entire system.

A sideways price movement is a state where long and short sides are evenly matched. In this state of equilibrium, the bulls cannot decisively overwhelm the bears to form a decisive upward breakout; nor can bears decisively overwhelm the bulls, thus forming a decisive downward breakout. So it's time to go sideways.

The so-called sideways trade does not mean that the price has not moved at all, but rather that the price fluctuates less over a long period of time, remains within a range, and has no significant upward or downward trend.

Higher, bulls overwhelmed bears, and continued buying drove prices higher. Investors are full of optimism. Sentiment pushes investors to keep buying, thus creating a positive feedback cycle of growth.

Falling, bears overwhelmed bulls, and continued sell-offs drove prices down. Investors are full of pessimism. Sentiment pushes investors to continue to sell off, creating a positive feedback cycle of decline.

Sideways, on the other hand, are long or empty, and no one party's efforts can drive a positive feedback cycle. The other party's strength is enough to stop any trend from occurring, thus creating a negative feedback loop.

At this point, the price is within a relatively limited range. Short-term speculation has made it difficult to profit from short-term speculative operations due to uncertain direction. Sideways markets are often viewed as a state of “uncertainty” or “waiting for a breakthrough.” People often face more confusion in this kind of market because there is a lack of clear upward or downward signals.

It's hard for people to choose the right strategy. People become nervous after repeated fluctuations and unsuccessful breakthroughs, so they overlook or miss when the real breakout trend arrives. People can feel uncertain and anxious, which puts a lot of psychological stress on them. This kind of pressure often makes people who have carried the excitement of a sharp rise, or the fear of a sharp fall, give up or leave the market too early, miss out on future market conditions, or be caught off guard by sudden breakthroughs.

The tripartiality of prices causes those who are mired in it to repeatedly fluctuate between optimism, fear, and uncertainty, thus constituting the overall complex and chaotic behavior of the market.

People are unable to accurately measure and grasp the behavior of the market, so they argue over whether it is random.

The Heiner model points out that perfect rational behavior has no pattern and cannot be predicted. In the eyes of a Thanksgiving turkey, human behavior is random, unfathomable, and frightening. However, killing a turkey on Thanksgiving is a completely rational and definitive thing for people.

As a result, investors who can get through the cycle are no longer just a turkey's ignorance; they are closer to human rationality.