Bitcoin price is once again flirting with resistance above $10,000 but has yet to penetrate and hold above the key level. This latest visit has resulted in a lower high.
Unless the cryptocurrency can get through and set a new local peak, the asset is at risk of setting a new lower low. It could also put the asset at risk of setting a new bear market bottom, even despite what market sentiment may suggest.
Sentiment Says Bull Market Is Here, But Has Bitcoin Really Bottomed?
All markets are cyclical and go through periods of prosperity and exuberance that get brought back down to reality through decline and destruction.
It’s been nearly four full years since Bitcoin peaked at $20,000. The crypto bubble that burst is now a distant, yet painful memory. The asset class, however, is still full of promise and potential, and positive growth is just days away at this point.
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Chartered market technicians claim technicals point to a new uptrend forming in an asset that’s primarily been bullish throughout its existence. A breakout at first glance appears to be clear as day.
Technical analysts utilize tools and indicators that assist them with understanding where assets are in such a cycle. One such tool, designed to measure the strength of a trend, could indicate that Bitcoin hasn’t yet bottomed.
And if the asset hasn’t yet bottomed, when might this happen, and how low could prices fall?
Average Directional Index on BTCUSD Gives Ominous Bear Signal
It seems impossible to believe, but indicators supply data without bias. The Average Directional Index is one of those tools, designed by J. Welles Wilder to measure trend strength.
Wilder also developed other popular technical analysis tools, such as the Relative Strength Index and the Parabolic SAR.
The ADX also consists of two directional movement indicators. When the two indicators cross, it signals if the trend is bearish or bullish. The ADX itself then measures how strong a trend is.
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Readings over 20 suggest a trend is picking up in strength, and the higher the number goes, the stronger the trend. High readings could suggest a trend is reversing, and when readings are at extreme lows, there’s next to no trend at all.
On monthly timeframes on BTCUSD charts, the ADX is giving a potentially frightening signal. According to the tool, Bitcoin may not have bottomed yet.
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