The bitcoin price appears to be in a downtrend after spending almost 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 being the weakest ever after such a signal, Bitcoin could risk plunging to below $20,000 per coin. But why?
A reminder of the now-broken Bitcoin uptrend
2020 was the perfect storm for Bitcoin and the aggregate crypto markets. Talk of inflation, a supply shock and nations in turmoil ensured investors flocked to the scarce and often innovative emerging assets.
Institutions, hedge funds and even corporations began to pay attention to Bitcoin - and the larger crypto market began to boom on the back of Ethereum, DeFi, NFTs and Dogecoin.
More big names entered the space - more than ever before, and Bitcoin is now in the portfolios of the wealthy around the world. The desire to buy BTC before anyone else sent the price per coin on a parabolic upward trend, taking it from under $4,000 to over $65,000.
The massive attention helped get Coinbase listed - but since then Bitcoin and the rest of cryptocurrency have been in a downtrend, and it could get much worse. Now that parabola has been broken.
Why the parabolic SAR could be a warning of a crypto collapse
Now that the tool has triggered, even with the lowest percentage drop in history, Bitcoin is still in danger of falling below $20,000. Or even lower. An 84% drop would take the top crypto asset back to around $10,000.
Traders are using the Parabolic SAR to move their stop losses up in profit. Consequently, the only hope left for bulls is that this level was chased on purpose. The fall has coincided with the opening of the year - so there are also many technical reasons for the target.