Bitcoin price is trading at over $33,000 at the time of this writing, but that’s nearly $9,000 away from the high it set days ago. And while the cryptocurrency is still well above 2020 prices, the asset’s largest-ever daily candle in terms of total price moved is forming and it is shaping up to be bearish.
What does this mean for the bull market that was brewing, and how bad could this correction get?
Bitcoin Breaks Previous Records, Bubble Legacy Could Lead To Preemptive Bears
Bitcoin started 2021 off on a tear, closing out the year of the pandemic on an extremely high note. In fact, the cryptocurrency closed 2020 at a price almost five times what it started the year off from.
Inflation fears in the wake of unprecedented money printing have led investors to assets like gold and Bitcoin. High wealth individuals are scrambling for ways to protect capital in the economic uncertainty to come, and many are now speculating that the cryptocurrency will do the job better than the precious metal will.
RELATED READING | BITCOIN WEEKLY “RELATIVE STRENGTH” MORE POWERFUL THAN RECORD 2017 RALLY
The waterfall of gold funds flowing into Bitcoin combined with the asset’s limited supply sent prices into the stratosphere in the final quarter of 2020. In just months, Bitcoin rose from $10,000 to a high of right below $42,000.
Largest daily candle in history brewing on btc. just watching it play at this point pic.twitter.com/nXMaIZh5iq
— joshnomics (@joshnomics) January 11, 2021
The rally caught the attention of not only finance but the entire world. The way up was characterized by record-breaking weekly and monthly candles – a sign of what was to come, analysts concluded. However, Bitcoin is now about to set another record for the largest daily candle historically, and unfortunately, it is happening on the way back down.
Bitcoin has dropped more than $7,000 in a single daily candle | Source: BTCUSD on TradingView.com
Parabola Broken, But Has The Crypto Bull Market Concluded?
Bitcoin is both notorious and sought for its parabolic moves. Getting in ahead of them results in life-changing wealth. Buying the top sometimes leads to years of losses before things heat up once again. And when they do get going, the strength of the trend can quickly leave buyers behind.
The leading cryptocurrency by market cap has potentially just completed a parabolic advance as indicated by the largest ever daily corrective candle, currently at roughly $7,200 from wick to wick.
RELATED READING | GOOGLE TREND SENTIMENT BREAKS DOWN, WILL BITCOIN FOLLOW?
Because Bitcoin’s bubble-effect is so easily recognized, and both the price of the asset and supporting exuberance reached substantially higher heights than the last bull run. But like a double-edged sword, it also could worsen the selling initially.
No one wants to be left holding the bag like in 2017, which has resulted in a large chunk of profit-taking, panic-selling, and a cascade of longs liquidated. The psychology of a parabolic move broken could lead investors to believe another bear market is next.
Bitcoin will retrace deep enough to convince you that the bull market is over
— Rekt Capital (@rektcapital) January 11, 2021
But that belief a bear market is coming could create the ideal sentiment shift for a shakeout of epic proportions. Institutions that are accustomed to buying the blood, will be doing just that in preparation for yet another parabolic wave.
If that occurs, this wasn’t the long-term top, and despite any aggressive selloff, another parabolic wave will arrive before the end of the year.
Featured image from Deposit Photos, Charts from TradingView.com