Bitcoin price in a downtrend, after spending nearly an entire year in a parabolic uptrend. An indicator with the name “Parabolic” on the monthly timeframes gave a signal that, according to previous cases, it always led to a catastrophic drop in the highest cryptocurrency by market capitalization.
Even if the resulting sell-off is the weakest on record after such a signal, it could still put Bitcoin at risk of dropping below $20,000 each. Currency. Here’s why.
Remember the broken Bitcoin update now so far
It was 2020 The Perfect Storm for Bitcoin and other cryptocurrencies. Talk of inflation, supply shock, and turbulent states has led to investors flocking to scarce and innovative emerging assets.
Institutions, hedge funds, and even corporations are starting to get interested in Bitcoin, and the larger crypto market is starting to boom due to Ethereum, DeFi, NFTs and Dogecoin.
Related reading | Bitcoin Bull Highlights Hammer Reversal, But Support Must Hold
More big names have been drawn into the space than ever before, and Bitcoin is now in the wallets of the wealthy around the world. Scramble to buy BTC before anyone else sends the price for each Currency In a parabolic uptrend, moving it from below $4,000 to over $65,000.
Help all the attention Coinbase launched to the publicHowever, since then Bitcoin and the rest of the cryptocurrency have been in a downtrend, and it could get even worse now that the parabola has been broken.
The Parabolic SAR hasn't been hit many times in Bitcoin's history | Source: BTCUSD on TradingView.com
Why the Parabolic SAR could warn of more crypto crash
When the bitcoin price broke its parabola in early 2018, he was a creative trader The famous Peter Brandt called for an 80% correction.Give or take a few percentage points on both sides. A year later, the leading cryptocurrency by market cap has fallen to its limit Bear The market bottomed for a full 84% retracement.
A tool that can help tell traders when an asset is moving parabolic, and through that tool where stop loss orders are placed, can indicate that bitcoin will drop a lot now that the parabola has broken again – perhaps as much as Brandt called in the past.
Related reading | The Missing Component of a Complete Bitcoin Reversal
The Technical Analysis The instrument, called the Parabolic SAR, can indicate when to “stop and reverse” the trend. The recent sell-off touched the Parabolic SAR on the monthly time frames, and every time this happened, bitcoin fell 72% or more against the dollar. At its highest point, the post-SAR drop reached 86% – not far from the stats Brandt shared.
With the tool running, even at the lowest ever percentage drop in history, Bitcoin is still at risk of dropping below $20,000 or even lower. Up to 84%, which we now know happens when the parabola breaks, could bring the top crypto asset back to around $10,000.
Merchants use SAR equivalent To move stop-loss orders higher in profits, so the only hope left for bulls is that this level was intentionally caught. The drop coincided with the annual opening, so there are plenty of technical reasons for this target as well.
Featured image from iStockPhotos, Charts from TradingView.com