Experienced analysts and media outlets, including Cointelegraph, have recently pointed out some indications that the rally in the price of Bitcoin (BTC) could be extended.
Bollinger Band creator John Bollinger has one of those bearish views, advising traders to use a topping stop, as signs of a “top” are forming.
However, it is noteworthy that the Bollinger Bands and the Fear and Greed Index are backwards metrics. Therefore, whenever there will be a weekly rally0% assembly, such as the most recent.
As crypto analyst TechDev_52 has rightly questioned, there is no way to know if we are entering a major potential correction or a continuation of an assembly.
Now you know why they call this bear a “trap.” It’s horribly believable.
How do you know “trap” from “peak”? One is round to the other.
– TechDev (ch TechDev_52) May 16, 2021
For example, the popular YouTuber and trader Nebraskanguna shows that the recent 56 56,000 peak could be the top range of a bullish channel that pointed to Bitcoin in late July.
OBV perking up but still not completely broken.
Hit the top of the channel.
An OBV breakout for mega bullish continuity would like to see bullish consolidation in a higher range towards w / price breakout. https://t.co/btm5aW7WTW pic.twitter.com/kPqwOSMgE1
– bnebraskangooner October 6, 2021
The “greed” mode can last for weeks or months
Going back to the Fear and Greed Index, below are some examples of how this kind of metric can sustain excess buying levels for more than three or four weeks.
Notice how 2. From January 2 to February 2, the Bitcoin Fear and Greed Index remained above 5, indicating that traders are overconfident.
Calculates how bright the market is using metric trading volume, future open interest, social metrics and search data.
Thus, it took four weeks before the price of Bitcoin was corrected after the warning sign popped up. Anyone who sold in the first days after the indicator flushed missed the next 0% rally rally.
A similar pattern occurred between July 23 and August 25, when Bitcoin prices continued to rise. Yes, a correction will always come at some point, but how many weeks or months later?
Bollinger Bands, a good short-term indicator
John Bollinger is an experienced and respected trader, but his indicators are some deviations based on the moving average and current volatility. In short, considering the normal 4.5% daily volatility of Bitcoin, 30% weekly action will remain out of this range.
Of course, Bitcoin follows a minor correction when it breaks the upper Bollinger Bands, but it has absolutely zero correlation with the price of two to four weeks.
Funding rates have been neutral
Finally, one should analyze the rate of funds, their leverage varies to maintain the balance of risk between the fee long (buyer) and shorts (seller) charged by the Derivatives Exchange. Sure enough, when a purchase spray is performed, the index goes up.
The current average rate of 0.04% per hour, or 0.8% per week, is nothing out of the ordinary. Back in December 2020, for example, it stays above 1.5% per week for the whole month and then again in February 2021.
Similar to the Fear and Greed Index, this metric shows that buyers are gaining extra confidence because it exceeds 0.10% every 8 hours, but not necessarily a worrying level.
As long as buyers are confident that the rally will continue, paying 1.5% or even 3% weekly fee will not force them to close their leverage long. For example, if a deficit in the supply of bitcoin on exchanges caused a recent rally to accumulate $ 56,000, it could be $ 80,000 or more.
However, a crash could be expected if some bearish events occur in the near future, such as a rejection of an exchange-traded fund request or some strict U.S. ban on stablecoins. In such cases, Bitcoin will not violate all-time highs, and those backward metrics will eventually “work”.
The opinions and views expressed here are only their opinions Author And don’t necessarily reflect Cointelegraph’s opinion. Every investment and trading move involves risk. You should do your own research when making decisions.