BTC - The Power of Three (Bearish Scenario) Bitcoin / TetherUSBINANCE:BTCUSDTVIAQUANTRight now, there are two mid-term scenarios I see playing out given the current price action. This post will cover the bearish outlook, and my next post will break down the bullish scenario. While I believe the bullish case is more likely, BTC remains in a bear market — meaning strength favors the bearish scenario over a counter-trend rally. Either way, I want to lay out both so you can be prepared for whatever BTC does next. What is the Power of Three? The Power of Three is a market-making model that focuses on institutional activity. It consists of three phases: Phase 1 – Accumulation (Yellow Box) Price consolidates for a period of time between strong support and strong resistance. This can be clearly seen in Bitcoin's current price action, dating from February 5th to March 4th. The buying demand, or support, is located around the range lows at $63k, and the selling supply, or resistance, is located at the range highs of approximately $71.5k. You could also use the $70k level as the range high (with slight deviations) as that is primarily where the top of the volume profile sits. Therefore, depending on how you draw this range, the Manipulation Phase would begin at a break above either $70k or $71.5k. Either way, price is currently still within the Manipulation Phase, or finishing it up. Phase 2 – Manipulation (Red Box) This is the liquidity phase. Market makers need to push price in the true intended direction, and they use this phase to execute false breakouts and stop-loss hunts. For example, if traders are holding shorts with stop losses set at range highs, market makers will push price through that range to trigger those stop-loss orders. For short positions, this means triggering buy orders to close out those trades. If the true trend is to the downside, market makers will be looking to accumulate liquidity in order to load up on short positions and offload supply. By manipulating price above the range, they trigger a wave of buy orders in the form of stop-loss triggers, making it easy for their sell orders to be filled. On top of that, breakout traders speculating on a continuation add even more buy-side liquidity into the order books for supply to sell into. Once price breaks back below the range and enters the Distribution Phase, many of the newly trapped longs will have stop losses set below the range. For long positions, those stop losses trigger sell orders which help market makers push price lower and ignites a liquidation cascade that completes the Distribution Phase. If this plays out, it would be extremely similar to the 2022 bear market price action. With that in mind, I see two sub-scenarios for how this bearish setup resolves: Scenario 1: The Manipulation Phase is nearly complete. Price fails to hold above $70k and rolls over directly into the Distribution Phase, pushing price below $60k. Scenario 2: Price finds short-term support and bounces again. From there, price either creates a lower high below the $74k top and continues into the Distribution Phase, or it creates a higher high (wiping out more shorts) before a potential bearish divergence forms and sends price into distribution. Phase 3 – Distribution (Green Box) This phase will trigger the most fear and will likely produce a local low, if not a full bear market bottom. The main area of confluence I am watching is between $56k–$60k. This range would allow institutions to exit their short positions at a premium and then re-accumulate BTC near the lows at a discount. Sub $60k would trigger many long stop-loss orders which would trigger as sell orders creating the sell-side pressure necessary to fill the orders of institutional buyers. This is how I view the bearish scenario playing out if the true trend and momentum remain to the downside. Check out my next post for the bullish counter-trend rally scenario.