Fundamentally, Bitcoin and crypto have never been stronger, and this has been backed up by blockchain metrics showing major players are accumulating BTC and other coins, with very little reserves left on exchanges.
However, the crypto market just saw a severe selloff to the tune of one trillion dollars evaporated in around a week. Fundamental analysis couldn’t see this crash coming; however, technical indicators were screaming that a correction was long overdue.
Considering how far the crypto market climbed without a significant pullback, it made the eventual reset that much more severe. Here are the technical indicators PrimeXBT traders used to tell that a trend change was coming – the same indicators that can be used to understand when the bull trend is back on.
Moving Average Convergence Divergence (MACD)
The moving average convergence divergence indicator, also called the MACD, is considered a lagging indicator and therefore is best used to confirm trends changes in price action with a crossover.
On weekly timeframes, the MACD has turned bearish in Bitcoin, signaling that momentum has turned downward for the time being. The MACD is still well in bull territory, so there’s not necessarily a reason to fear at the moment.
The severity of the crash increased once BTC fell below the zero line on daily timeframes, signaling the correction would deepen. If the weekly MACD does the same, things could turn extremely bearish for crypto as a whole.
Traders will want to watch for the daily MACD crossing back upward bullish before considering the bull trend back on. A weekly crossover toward bullish would further confirm the uptrend but considering that the indicator is indeed laggy, waiting for the weekly could lead to missing out on the rest of the bull market.
Relative Strength Index
The Relative Strength Index measures a trend’s strength and signals when assets reach overbought or oversold levels. Trending assets can remain oversold or overbought for some time, however.
Bitcoin had already reached overbought levels several times on daily timeframes over the course of the last year and then some, and almost always resulted in a short-term correction. Meanwhile, the RSI reaching bull market levels took Bitcoin to a new all-time high to start 2021, which also pushed the monthly RSI into oversold levels for the first time since late 2017 and early 2018.
A bear market sharply followed afterward in Bitcoin and crypto, wiping out as much as 99% of the value from altcoins and 80% from BTC. Bitcoin is now back below the monthly RSI oversold levels, which could mean the bull market has once again ended. However, the reset in the RSI can also be bullish depending on how strong the underlying bull market trend is in Bitcoin and crypto.
The Bollinger Bands measure volatility and can indicate where support and resistance lie on any timeframe. On daily timeframes, Bitcoin had formed what the tool’s creator calls “three pushes to a high.”
It involves pushing up against the upper band three times for three highs, with each time Bollinger Band Width tightening. The signal suggests that the asset will test the middle band, and on weekly timeframes, Bitcoin certainly did.
It tested the middle-SMA in the Bollinger Bands. The upper and lower bands are standard deviations of the simple moving average. Passing through the mid-BB is a signal to go short Bitcoin, unfortunately. Looking back at the 2017 bull market, Bitcoin price never closed a weekly candle below it, suggesting that the bottom band will get touched eventually.
The Ichimoku indicator provides a look at all market conditions “at a glance” and features a variety of valuable tools in one. For example, when the Kijun-sen crossover over the Tenkan-sen, it can signal a change in trend.
The Ichimoku cloud or Kumo also measures volatility similar to the Bollinger Bands and plots support and resistance. There are also two leading spans and one lagging span, each also providing traders with essential data.
Bitcoin spent the last few weeks in the cloud on daily timeframes before raining down out of it. Bitcoin is still holding within the cloud on the three-day, while on weekly timeframes, price action is now below both the Kijun-sen and the Tenkan-sen. On monthly timeframes, Bitcoin is sitting right on top of them. Losing the two lines could send the top cryptocurrency plummeting further to a weak point in the cloud, exactly where a kumo twist lies. This could spell disaster for all of the crypto market if such a target is reached.
Top Trading Indicators Are Built In At PrimeXBT
PrimeXBT is an award-winning trading platform that lets traders fund a margin account with BTC, ETH, USDT, or USDC and access more than 50 CFDs across crypto, forex, stock indices, and commodities all under one roof.
The advanced trading tools are plentiful and include the industry’s best technical analysis software provided by TradingView built right into the easy-to-navigate user interface. In addition to drawing chart patterns, users of the platform can chart with Gann fans, Fibonacci retracements, harmonics, and much more. But best of all, the most popularly used technical indicators and oscillators are also in tow.
Anyone can sign up and make a deposit for free and access tools like the MACD, Bollinger Bands, Ichimoku, RSI, and many more that can make a world of difference in improving the chances for success.