Top 4 Bitcoin Indicators To Watch In A Bear Market
The bull market is gone and the long crypto winter is definitely scaring traders. Bitcoin price has dropped to even lower than bears’ expectations, what indicator will help us predict BTC’s return after this severe drop?
Bitcoin 200-Week SMA
One technical indicator that has repeatedly signaled the end of Bitcoin’s historic bearish period is when the price slipped below the 200-week simple moving average (SMA) and then rallied above it.
As shown in the areas marked with purple arrows on the chart, instances of BTC price falling below the 200-week SMA (light blue) and then rising back above it occur before the uptrend. on the market.
A solid BTC recovery back above the actual price (which is the total purchase price of all Bitcoin and represented by the green line in the chart above) can also be used for additional confirmation of the market trend positive change.
Another technical indicator that can provide insight into the timing of bear market lows is the relative strength index (RSI).
More specifically, previous bear markets have seen Bitcoin’s RSI fall into oversold territory and drop below 16 around the time BTC set a low.
Based on the two cases highlighted above with orange circles, confirmation of the low will not occur until the RSI climbs back above 70 into the overbought zone, signaling a one-time increase in demand back to the market again.
Market Value vs Real Value
Market Value vs Real Value (MVRV) Z-score is an indicator designed to identify periods when Bitcoin is overvalued or undervalued relative to its “fair value”.
The blue line on the chart represents the current market value of Bitcoin, the orange line represents the actual price, and the red line is the Z-score standard deviation test that helps draw extremes in the data between market value and real value.
As seen on the chart, previous bear markets coincided with a Z-score below 0.1, marked by the blue band. The start of a new uptrend will not be confirmed until the indicator rebounds above the 0.1 mark.
Based on historical performance, this metric suggests that Bitcoin is at more of a disadvantage in the near future, followed by a long period of sideways price action.
2-Year MA Multiplier
One final metric that can provide a simple way for Bitcoin investors to know when the bear market is over is the 2-year moving average multiplier. This indicator tracks the 2-year moving average (MA) and 2-year MA x5 for Bitcoin price.
Whenever BTC price falls below the 2-year MA, the market enters the bear territory. Once the price rebounds above the 2-year MA, an uptrend ensues.
On the other hand, a climb above the 2-year MA x5 signals a full-blown bull market and indicates the right time to take profits.
Traders can use this metric to look for good accumulation times (marked by blue shaded areas) or can wait until the BTC price breaks above the 2-year MA as a signal that the market is in trouble with bear field ends.
Whichever way a trader chooses to apply the above-mentioned indicators, it is important to remember that no indicator is perfect and there is always more downside risk.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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