Recently, the market has been quite volatile, so I decided to review some of Wyckoff's theories thoroughly and also use it as a learning note for myself.

Let's start with the most basic law of supply and demand. Simply put: when demand is high, prices go up; when supply is abundant, prices fall. It sounds straightforward, but it gets interesting when applied to Bitcoin. Why is Bitcoin long-term bullish? One fundamental reason is its fixed supply cap—there will never be more than 21 million coins, and this ceiling is set in stone. Another reason is that more and more people recognize its value, so demand continues to grow. In the short term, various positive and negative news will cause fluctuations, but as long as there is consensus on the asset, excess supply will eventually be absorbed—just like when water drops from 100 yuan to 0.1 yuan, you would definitely buy a few bottles. Altcoins without consensus are a different story; no matter how brilliant they once were, they will ultimately fade away. So, whether supply can be absorbed depends on whether the asset itself has value.

Next is the cause-and-effect law, which is especially important in Wyckoff's accumulation and distribution models. Simply put: the longer the sideways consolidation, the higher and more sustained the move. The longer the accumulation phase, the greater the energy stored; the larger the subsequent price swings. If it's a sideways move during the accumulation phase, it indicates that the main players are gradually building positions; if it's during the distribution phase, it suggests they are gradually selling off. Wyckoff's accumulation and distribution models help us interpret these cause-and-effect relationships. Interestingly, most of the time, we see the result first and then reverse-engineer the cause—that's the complexity of the market.

Finally, there's the input-output law, which simply states that price movements are reflected in trading volume. Rising prices accompanied by increasing volume are a healthy sign, but be cautious—small volume during a price rise might be a trap for the bulls, or if volume is unusually high but prices don't rise much, it could indicate selling pressure. When breaking through key levels, it's crucial to see if volume truly expands; otherwise, you risk being fooled by a false breakout. Volume involves various states like no volume, low volume, multiple times average volume, high volume, shrinking volume, and stair-step volume, and its relationship with price can be quite complex. However, Wyckoff's accumulation framework helps us understand the logic behind these changes.

These laws seem simple, but applying them effectively requires careful observation and comparison with real market data. I look forward to discussing strategies for attack and defense under high-volume bars in the future.