Fundamental Laws in the Crypto Market

The fundamental law play a key role in the Wyckoff method and consist of three laws. The law of supply and demand, the law of cause and effect and the law of efforts and results.

Law of Supply and Demand

This is the first law of the three fundamental laws. The law of demand and supply simply the main reason that determines the price in any cryptocurrency market. The relationship between demand and supply is what determines the price of any cryptocurrency asset. In simple terms, when the demand of a particular cryptocurrency is high, there is a greater chance of price increase. When the demand is higher than the supply or the rate of increase in demand is higher than the rate of increase in supply, price increases which causes the market to move upwards. When the supply is higher than the demand or the rate of increase in supply is higher than the rate of increase in demand, price decreases, this causes the market to move downwards. When the demand is equal to the supply, there are no significant price changes, hence price is either stable or move sideways.

The Law of Cause and Effect

This is the second law of the fundamental laws. In the law of cause and effect, it talks about that there is a relationship between the price movements and the actions that took place in the early stages. In simple terms, the law suggests that the changes in the supply and demand of any cryptocurrency doesn’t just happen at a random, instead it is as a result of past actions and events. Based on the Wyckoff method, it is the actions that took place in the accumulation or distribution phase that determines if the market will be bullish or bearish. Based on this, the accumulation or distribution phase are the cause and the uptrend and downtrend phase are the effects. The accumulation phase causes the market to move in an uptrend, and the distribution phase causes the market to move in a downtrend.

The law of efforts and result

This is the third law in the fundamental laws. In the law of efforts and results, price changes in the market is as a result of efforts. In simple terms, the law of efforts and results suggests that it is the price changes in either uptrend or downtrend is as a result of the efforts. For a trend to be maintained, the volume which is the efforts and price actions needs to directly proportional. Simply put, the trend in the market moves in a certain direction depending on the connection between the efforts and results. If the volume is high and the price is high, then the uptrend will be maintained. If the volume is low and the price is low, then the downtrend will be maintained. If there is a significant difference in the volume and price, then the market would most likely reverse upwards or downwards.

I will be using the ENJ/USDT pair. From the chart, you can see that the different phases of the market cycle. The accumulation phase began at the region of $0.2263 price point. This is the phase where the composite man is accumulating ENJ. As more and more investors continue to invest and accumulate, the price began to rise which cause the ENJ market to move into an uptrend. In the Uptrend phase, the price went all the way up to $2.6693. As some investors begin to sell which brings the re-accumulation. The rate of demand continued to rise, suppressing the selling force, the price broke its resistance level and entered a new high.

The next phase was the distribution phase, You can see on the chart that correction and reversal took place at the end of the uptrend which was at the $3.5484 price point. In this phase, the composite man is has made enough profit and is now taking selling his holdings to take profit. The demand began to reduce, the selling force continued to increase, this began to cause the price to fall. As demand continued to reduce and more and more investors began to sell and take profit, the price entered into a downtrend. In the downtrend phase, we can see the re-distribution caused by investors who fell into the trap because they thought the market would bounce back up. The selling force suppressed the buying force, which pushed the price downwards Understanding the fundamental laws is very important when it comes to investing or trading any cryptocurrency.