Ten Different Bearish Divergences Stack Against Bitcoin, But Drop Has Yet To Arrive
Bitcoin has been unstoppable from Q2 2020 on, bringing the asset to a new all-time high and restoring interest and bullish momentum in the cryptocurrency market.
But as the most dominant crypto asset in the space continues to climb with very few corrections in between, ten of the most widely used technical indicators are now giving bearish signals, by way of a divergence between the tool and price action. Here’s why this could bring with it the first major crypto crash since Black Thursday.
Remembering 2020: The Year Of The Pandemic And Bitcoin Emerging As A Store Of Value
The year of 2020 kicked off on a bullish note for crypto, taking Bitcoin from $6,000 to just over $10,000 by the end of February. The stock market had set a new all-time high, and things were looking positive going into the new year.
But then the pandemic struck, causing widespread panic over the impact on the economy, and with it a selloff of epic proportions. Stocks tanked, gold plummeted, and Bitcoin lost more than 60% of its value under month later.
Related Reading | Bitcoin Mathematics: Why 21 Million BTC May Have Been Chosen
The rest of the crypto space was even more devastated, but from the rubble rose the phoenix once again, and the asset is not only trading higher than then, but from a sharp move to under $4,000 the asset did a 5x and revisited its former peak around $20,000.
Along the way, coinciding with unprecedented fiat currency printing, the store of value narrative has taken hold of the cryptocurrency, and made it attractive for the first time to institutional investors and hedge funds.
But revisiting ATH resistance could bring with it the first major correction since Black Thursday. After such a substantial rise, a correction would be healthy and allow indicators to reset. Currently, ten individual technical indicators are all giving bearish divergence signals, potentially warning of the first real crash for the top crypto.
Ten different technical indicators are issuing warnings with bearish signals | Source: BTCUSD on TradingView.com
Ten Bearish Divergences Could Cut Crypto Valuations In Half, Still Too Late To Contain Bulls
According to a pseudonymous crypto analyst, ten unique technical analysis indicators are issuing a bearish divergence sell signal. Bearish divergences occur when price action moves opposite to the technical indicator in question – or in this case all ten.
The indicators included in the analysis are the MACD, On-Balance Volume, Stochastic, Klinger, Relative Strength Index, Stoch RSI, and more. Even more obscure tools in terms of crypto analysis, including the Elder Force Index, Fisher Transform, Money Flow Index, and TTM Squeeze are also giving the bearish signal.
As depicted above, all of the indicators made a lower high, which price action not only set a higher high but a new all-time high for the cryptocurrency.
The only thing that invalidates a bearish divergence, is a rise higher forming a higher high, and removing the divergence from the chart completely. The alternative is Bitcoin beginning to teeter, and eventually topple down to restest support below.
Featured image from Deposit Photos, Charts from TradingView.com