BTC price is holding at $55,000 despite a few bearish indicators. Bitcoin price refuses to pull back even though some other indicators such as Bollinger Bands point to overheating. cryptocoin.comExperienced analysts and media outlets, to whom .
Indicators in Bitcoin (BTC)
The bearish sentiments are based on a pattern from John Bollinger, creator of Bollinger bands, who recommends that traders use a trailing stop as a “top” marks are forming. However, it is worth noting that the Bollinger Bands and the Fear and Greed indicator are retrospective measurements. Therefore, when there is a 30% weekly rally, like the last one, these often indicate overbought levels. As crypto analyst TechDev_52 correctly questions, there’s no way of knowing if we’re entering a major potential correction or a continuation of the rally.
For example, popular YouTuber and trader Nebraskangooner shows that the last $56,000 could be the upper range of a bullish channel that has driven Bitcoin since late July.
“Greed” mode can last for weeks or months
Going back to the Fear and Greed indicator, below are some examples of how such a metric can maintain overbought levels for more than three or four weeks.
From January 29 to February 26, note that the Bitcoin Fear and Greed indicator stays above 65, indicating that traders are overconfident. This metric uses trading volume, futures open interest, social metrics, and search data to calculate how volatile the market is. Therefore, it took four weeks for a significant Bitcoin price correction to occur after the warning sign appeared. In the first days after the indicator flashed, the seller missed the ensuing 70% rally. A similar pattern occurred between July 23 and August 25 as the Bitcoin price continued to rise. Yes, a fix will always come at some point, but after how many weeks or months?
Bollinger Bands are a good short term indicator
John Bollinger is an experienced and respected trader, but his indicator includes the moving average plus some divergence based on current volatility. In short, given Bitcoin’s usual 4.5% daily volatility, a 30% weekly move would often be outside this range.
Of course, a minor correction will tend to continue once Bitcoin breaks the upper Bollinger band, but this has absolutely zero correlation with the price about two to four weeks later. Finally, the funding rate, a fee charged by derivatives exchanges to balance risk between long-term (buyers) and short-term (sellers) as their leverage changes, must be analyzed. Of course, the indicator rises when a buying spree occurs. The current eight-hour average rate of 0.04%, or 0.8% per week, is nothing out of the ordinary. For example, it stayed above 1.5% per week for a month in December 2020 and then again in February 2021.
Similar to the Fear and Greed indicator, this metric shows that buyers are overconfident as it crossed 0.10% in eight hours, but this need not be a worrying level. As long as buyers are confident that the rally will continue, paying a weekly fee of 1.5% or even 3% will not force them to close long-term trades. For example, if a Bitcoin supply shortage on exchanges caused the recent rally to $56,000 as holders pile up, it could be somewhere around $80,000 or higher. However, a collapse can be expected if some bearish events occur in the near future, such as the rejection of exchange-traded fund requests or the United States banning stablecoins. In such a case, Bitcoin will not exceed its all-time high and these retrospective measurements will eventually “work”.
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