Key takeaways:
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Bitcoin’s Supertrend indicator sent a “sell” signal that has led to a 77% price drop in the past.
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The crypto sentiment index in “extreme fear” suggests there is more pain ahead for Bitcoin investors.
Bitcoin’s (BTC) SuperTrend indicator has sent a “sell” signal on its weekly chart, an occurrence that has historically marked the start of a bear market.
Previous signals led to 77% to 84% BTC price drops
Bitcoin’s weekly chart showed that the SuperTrend indicator flashed a bearish signal when it reversed from red to green and moved above the price last week.
This indicator overlays the chart while tracking BTC’s price trend, like the moving averages. It incorporates the average true range in its calculations, which helps traders identify market trends.
Related: Strategy rides out Bitcoin crash, still on track for S&P 500 spot: Matrixport
The SuperTrend’s “sell” signal was confirmed after the BTC/USD pair produced a weekly close below the 50-week moving average (MA) on Sunday, a scenario that has historically marked the end of a bull market.
Previous confirmations from these two indicators were followed by 84% and 77% drawdowns during the 2018 and 2022 bear markets, as shown in the chart below.
“The Weekly SuperTrend indicator has flipped red for the first time since January 2023 (end of the bear market),” said crypto analyst Bitcoinsensus in an X post on Monday, adding:
“This means that, although not a certainty, we could be seeing early signs of a bear market starting to show.”
If history repeats itself, BTC could see a massive downward move to as low as $75,000, driven by decreased demand from Bitcoin treasury companies and persistent outflows from US-based spot ETFs.
Bitcoin sentiment indicator says there’s “pain ahead”
As Cointelegraph reported, the Crypto Fear and Greed Index has slipped into “extreme fear” at 11, its lowest since February.
Analysing Bitcoin’s previous price action when the index was at similar levels reveals two possible scenarios for the BTC/USD pair going forward.
In the first case, Bitcoin could drop lower before running to new all-time highs as seen in 2021 when the index spent May, June and July whipsawing between “extreme fear” and fear. As a result, the price dropped a further 40% before rising to new all-time highs of $69,000 in November 2021.
“There’s a good chance that more immediate-term pain lies ahead, a reversal will likely hit in the next 2-3 weeks,” analyst Milk Road said in a Wednesday Newsletter, adding:
“Lowered sentiment does not take new all-time highs off the table in the medium term.”
In the second scenario, Bitcoin could be entering a full-blown bear market, as seen in May 2022, when the Crypto Fear and Greed Index dropped into the “extreme fear” zone and remained there until July.
This period marked the most brutal part of the 2022 bear market that saw Bitcoin drop to $15,000 from its previous all-time high of $69,000.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
