Bitcoin (BTC) has undoubtedly been trading in a parabolic pattern since bottoming in December at $3,150. The past few months have seen the cryptocurrency market absolutely explode, posting new highs every other week. Until now anyway.
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As of the time of writing this, BTC has found itself changing hands for $11,300 — down around 20% from its year-to-date high of $13,850. The asset has failed to put in a new year-to-date high in about three weeks, marking the end of a nearly seven-month-long parabolic swing to the upside.
With this, some are wary that a large correction could ensue, one that could bring Bitcoin back to $7,000 or even pre-rally levels in the $4,000s and $5,000s.
You see, when parabolas correct in financial markets, they correct hard. In Bitcoin’s case, this is especially relevant, as it exists as an early-stage asset that is hyper-volatile and reflexive.
As Peter Brandt, a legendary commodities trader, recently pointed out, a violation of the parabola could send BTC falling back to Earth. In fact, he quipped in a tweet that the cryptocurrency could lose 80% of its year-to-date high value:
“If current parabolic phase is violated, we could expect either an 80% correction of 7-month advance or much smaller correction w/ definition of new parabola w/ shallower slope. $BTC Note formation of possible 2-wk H-amp;S or H-amp;S failure”, the long-term Bitcoin proponent wrote.
Not so Fast, There’s Hope for Bitcoin
While the parabola has broken, there is hope for Bitcoin. Industry commentator Nunya Bizniz recently pointed out that in previous notable parabolic advances, what marked the top was when BTC’s two-week performance moved above 70%.
Indeed, such strong showings by cryptocurrency bulls were seen multiple times in the tumult of 2011 — which saw BTC bounce around like a hot potato — during the 2013 crash from $1,200, and the peak of 2017’s $20,000 run.
When to exit a parabolic advance?
Top: BTC 2 week candles.
Bottom: Rate of Change or Performance.
Parabolic advances signal an exit when 2 week performance is 70%+.
Confirms earlier charts where a double in price in the last two weeks = sell. pic.twitter.com/D13oWTHYMy
-mdash; Nunya Bizniz (@Pladizow) July 13, 2019
So, in hindsight, selling once the two-week performance of Bitcoin moved above 70%. This time around, the cryptocurrency hasn’t printed such a gain, implying, by historical measures anyway, that the parabolic advance either isn’t “the big one” or that it may continue into the coming weeks and months.
Bizniz’s latest noticing comes shortly after he noted that Bitcoin has the potential to reclaim an uptrend, not collapse by 80% as per the de-facto rule of parabolas in financial markets. He explained that BTC could find some support on the bottom bound of an upward-sloping uptrend, which has merged with the previous magnitude of the parabola.
Parabolic rises tend to collapse and lead to 80%+ corrections. Some however morph into less steep parabolic moves, finding support at prior trend lines in the parabolic rise. Will Bitcoin fall below green and find supoort at where purpule and yellow merge with parallel channel? pic.twitter.com/ThInBq1yYX
-mdash; Nunya Bizniz (@Pladizow) July 11, 2019
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These aren’t the only points that should have Bitcoin bulls somewhat relieved.
Back when BTC lost $4,000 following its rally to $13,800 in late-June, Crypto Twitter was bearish. Extremely so. In fact, per previous reports from this outlet, during the collapse, analysts were very wary because they believed that the strong selloff marked an end of the parabola. Some commentators were wary that BTC would see a “couple of down weeks”, which may have brought the asset under $8,000.
Of course, this didn’t happen, as made apparent by BTC recovering to $13,000 to fall again. This could imply that the current fears of a strong correction may be baseless.
But, whether or not the market reverses this time around remains to be seen.
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