Trend Indicator: Bear Market Didn’t End After Bitcoin’s $3,700 Capitulation

Tony "The Bull" Severino

4 years ago

3 mins read

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Bitcoin price is once again flirting with resistance above $10,000 but has yet to penetrate and hold above the key level. This latest visit has resulted in a lower high.

Unless the cryptocurrency can get through and set a new local peak, the asset is at risk of setting a new lower low. It could also put the asset at risk of setting a new bear market bottom, even despite what market sentiment may suggest.

Sentiment Says Bull Market Is Here, But Has Bitcoin Really Bottomed?

All markets are cyclical and go through periods of prosperity and exuberance that get brought back down to reality through decline and destruction.

It’s been nearly four full years since Bitcoin peaked at $20,000. The crypto bubble that burst is now a distant, yet painful memory. The asset class, however, is still full of promise and potential, and positive growth is just days away at this point.

Chartered market technicians claim technicals point to a new uptrend forming in an asset that’s primarily been bullish throughout its existence. A breakout at first glance appears to be clear as day.

Technical analysts utilize tools and indicators that assist them with understanding where assets are in such a cycle. One such tool, designed to measure the strength of a trend, could indicate that Bitcoin hasn’t yet bottomed.

And if the asset hasn’t yet bottomed, when might this happen, and how low could prices fall?

Average Directional Index on BTCUSD Gives Ominous Bear Signal

It seems impossible to believe, but indicators supply data without bias. The Average Directional Index is one of those tools, designed by J. Welles Wilder to measure trend strength.

Wilder also developed other popular technical analysis tools, such as the Relative Strength Index and the Parabolic SAR.

The ADX also consists of two directional movement indicators. When the two indicators cross, it signals if the trend is bearish or bullish. The ADX itself then measures how strong a trend is.

Readings over 20 suggest a trend is picking up in strength, and the higher the number goes, the stronger the trend. High readings could suggest a trend is reversing, and when readings are at extreme lows, there’s next to no trend at all.

On monthly timeframes on BTCUSD charts, the ADX is giving a potentially frightening signal. According to the tool, Bitcoin may not have bottomed yet.

BTCUSD Average Directional Index Monthly | Source: TradingView

Compared to the previous bear to bull cycle, the ADX hasn’t yet fallen below 20, suggesting the previous trend hasn’t fully ended. Adding more credence to the theory, the two directional indicators have yet to cross bearish during this downtrend.

While this could simply indicate Bitcoin is just too bullish for the indicators to cross bearish, comparisons to the past show otherwise.

BTCUSD Average Directional Index 5-Day | Source: TradingView

Switching to yet another high timeframe on BTCUSD, the 5-Day chart on the ADX shows that the trend is currently at the lowest strength ever recorded in the cryptocurrency.

If that’s the case, a short-term trend direction could be chosen soon. If the direction is down on the 5-Day, the ominous Monthly BTCUSD signal could confirm. If the trend direction is up, Bitcoin may never cross bearish on the ADX, and the trend may pick up in strength from here.

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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