Bitcoin price is in a downtrend, after spending almost a full year in a parabolic uptrend. An indicator that goes by the name “parabolic” in the monthly time periods has given a signal that, according to previous instances, has always resulted in a catastrophic fall in the main cryptocurrency by market capitalization.
Even if the resulting selloff ends up being the weakest ever after such a signal, it could still put Bitcoin at risk of a drop below $ 20,000 per coin. This is why.
Recalling Bitcoin’s uptrend now broken so far
2020 was the perfect storm for Bitcoin and the rest of the cryptocurrencies. Talk of inflation, a supply shock and nations in crisis sent investors flocking to the scarce and innovative emerging assets.
Institutions, hedge funds, and even corporations began to pay attention to Bitcoin, and the largest crypto market began to grow due to Ethereum, DeFi, NFT, and Dogecoin.
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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. The struggle to buy BTC before everyone else sent the price per coin in a parabolic uptrend, taking it from under $ 4,000 to over $ 65,000.
All the attention helped Coinbase go public, but since then Bitcoin and the rest of the cryptocurrencies have been in a downtrend, and it could get a lot worse now that the parable has broken.
The Parabolic SAR Has Not Been Affected Many Times in the History of Bitcoin | Source: BTCUSD on TradingView.com
Why Parabolic SAR Could Warn Of Further Crypto Crash
When the price of Bitcoin broke its parabolic advance in early 2018, iconic trader Peter Brandt called for an 80% correction, plus or minus a few percentage points on each side. A year later, the leading cryptocurrency by market capitalization plunged to the bottom of its bear market for a full 84% retracement.
A tool that can help traders tell traders when an asset has gone parabolic and, through that tool, where to place stop-losses, could indicate that Bitcoin will fall much further now that the parabola has broken again. , possibly as much as Brandt asked for in the past.
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The technical analysis tool, called Parabolic SAR, can indicate when a trend has “stopped and reversed.” The recent selloff hit the Parabolic SAR on monthly time frames, and in the past, each time it happened, BTC fell 72% or more against the dollar. At the highest point, the post-SAR drop reached a staggering 86%, not far behind the statistics shared by Brandt.
With the tool activated, even with the lowest percentage drop in history, Bitcoin is still at risk of falling below $ 20,000 or even less. Even at 84%, what we now know happens when the parable breaks, it could take the crypto asset higher to around $ 10,000.
Traders use the Parabolic SAR to move their profit loss limits, so the only hope left for the bulls is that this level was hunted on purpose. The drop coincided with the annual open, so there are also many technical reasons for the target.
Featured Image from iStockPhotos, Graphics from TradingView.com