Key facts:
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In the past, this indicator has predicted large price declines.
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Occasionally, the Bull-Bear Market Cycle Indicator has given “false” signals.
With the price of Bitcoin (BTC) retreating to around $58,000, various data points have once again indicated a bear market. This is shown by the metric known as the “Bitcoin Bull-Bear Market Cycle Indicator.”
This metric, which translates to “Bitcoin Bull-Bear Market Cycle Indicator,” is a tool used by traders to identify price trends. What it does is measure the difference between the profit and loss ratio of the investors of bitcoin, according to its 365-day moving average.
When this indicator is above zero, it reflects a bull market in which profits predominate among investors. bitcoin. On the other hand, when it is below such a line, it shows a bullish market with a dominance of losses in the market. The latter is what is currently happening.
For a week now, the indicator has been reflecting that bitcoin is in a bear marketas well as in brief periods over the past month. This shows that the price is losing strength, considering that this metric has remained mostly in a bull market since the beginning of last year.
This can be seen in the following chart from the CryptoQuant explorer, which shows the transition from a bullish market in orange to a bearish one in light blue. It should be noted, however, that the latter is a mild intensity; otherwise, when it is extreme, it is painted in dark blue.
Bitcoin bull-bear market cycle indicator. Source: CryptoQuant.
In bearish periods, It is crucial that demand recovers by boosting the price so that this phase does not extend and deepen over time.Otherwise, further price declines are possible. This metric therefore serves as an indicator of possible price movements.
Julio Moreno, CEO of CryptoQuant, who weeks ago described the return of this indicator to the bull market as good news, was expressed on the relapse. “From a valuation perspective, if the price falls below $56,000, the risks of a larger correction increase,” he said.
As seen below, the $56,000 level has been acting as support-resistance for the past two months. Therefore, the market could test the bottom there if supply pressure increases. However, if it breaks this line, it is possible that it will stop in the area between $49,000 and $54,000, given that it has acted as its lows in that period.
Bitcoin price over the past six months. Source: TradingView.
Meanwhile, Bitcoin remains within the corrective sideways range it has been holding for almost six months, posting lower lows and lower highs. It is currently trading 20% below the all-time high of $73,700 it recorded in March.
Price indicators sometimes give false signals for bitcoin
Beyond the observed situation, it should be noted that The entry of a bear market in this indicator does not always indicate that there will be further price drops for bitcoin.. When demand picks up, pushing up the price, as it has done on occasions over the past month, a bullish trend is once again in sight. Therefore, it all depends on what drives supply and demand.
As reported by CriptoNoticias, It is expected in September a cut of interest rates In the United States, this is driving down bond yields and stimulating demand for risk. In addition, this month marks the end of the northern hemisphere summer, a season in which markets tend to fall, so there are factors that encourage a return to the upward trend.
In this sense, market operators must consider and manage the risks based on the analysis of different aspects to predict the continuity of the price, not just on one indicator.
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