Bitcoin price appears to be in a downtrend after spending nearly a full year in a parabolic uptrend. An indicator has now issued a signal after which Bitcoin has always crashed catastrophically in the past.
Even if the resulting sell-off ends up as the weakest ever after such a signal, Bitcoin could risk plunging to below $20,000 per coin. But why?
The Memory of the Now Broken Bitcoin uptrend
2020 was the perfect storm for Bitcoin and the aggregated crypto markets. Talk of inflation, a supply shock, and nations in turmoil caused investors to flock to the scarce and often innovative emerging assets.
Institutions – hedge funds and even companies began to pay attention to Bitcoin-and the larger crypto market began to boom due to Ethereum, DeFi, NFTs and Dogecoin.
More big names came into the space-more than ever, and Bitcoin is now in the portfolios of the wealthy around the world. The desire to buy BTC before everyone else sent the price per coin on a parabolic uptrend, taking it from under $4,000 to over $65,000.
The massive attention helped bring Coinbase to the stock market-but since then, Bitcoin and the rest of the cryptocurrency have been in a downtrend, and it could get much worse. Now that the parabola has been broken.
Why the Parabolic SAR Could Be a Warning of Crypto Collapse
When the Bitcoin price broke through its parabolic rise in early 2018, iconic trader Peter Brandt famously predicted an 80% correction – plus/minus a few percent. A year later, the leading cryptocurrency by market capitalization crashed to its bear market floor for a full 84% retracement.
A tool that tells traders when an asset has become parabolic could signal that Bitcoin will continue to fall now that the parabola has been broken again. Possibly as much as Brandt predicted in the past.
The technical analysis tool, called Parabolic SAR, can show when a trend has ” stopped and flipped.” The recent sell-off touched the Parabolic SAR in the monthly timeframe. In the past, BTC has fallen every time this has happened. By 72% or more against the dollar. At its highest point, the post-SAR crash reached a dizzying 86%-not far from the statistics Brandt shared.
Now that the tool has triggered, even with the lowest percentage fall in history, Bitcoin still runs the risk of falling below $ 20,000. Or even deeper. An 84% drop would bring the top crypto asset back to about $ 10,000.
Traders use the Parabolic SAR to move their stop losses up in profit. Consequently, the only hope left for bulls is that this level was hunted on purpose. The fall coincided with the opening of the year – so there are also many technical reasons for the goal.
Text credits: Newsbtc
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