By CCN: Nothing is stopping the bitcoin price from establishing fresh yearly highs above $6,000.
The world’s leading cryptocurrency today settled a new intraday peak towards $6,989 on US-based exchange Coinbase, its best since September 5, 2018. The sustained uptrend helped bitcoin to post a net bottom-rebound of 122.69-percent. At the same time, it pushed the asset’s year-to-date performance to 83.98-percent.
The move reflected traders’ willingness to purchase bitcoin at newly-established higher highs, leading to a parabola formation. In retrospective, a parabolic move happens when an asset moves upward in an active bullish channel, performs one upside breakout after another without breaking a sweat, and prompts people to chase the price.
In a parabolic action, the speculators buy because the price is going up. They seldom care about the underlying fundamentals that might/might not be pumping the asset. Then, almost too suddenly, the price pursues a series of volatile downside corrections before establishing a full-fledged bear market (worst case). Traders who might have purchased the asset at session high are the one that gets burnt the most.
A Correction is Coming
Bitcoin, now at the center of a bullish orgy, is forming a traditionally-recognized parabolic pattern anyway. A young asset that it is, bitcoin has seen similar parabola formations three times in its decade-old market. The first two parabola formations took place in 2013, while the other one happened in 2017. Each one ended up in a severe crash, albeit reigniting amazing upside moves later.
One cannot predict the length of the ongoing bitcoin parabolic move. The long-term outlook sets the price anywhere above $20,000, as predicted by one-too-many bitcoin bulls. But beware, the longer the parabola formation is, the bigger the correction would be. For instance, the 2017’s upside action reached its apex in nine-months, but its correction lasted for more than 12 months. Similarly, one of the 2013’s parabola took eleven-months to form and 13-months to bottom-out.
Alex Krüger aptly coupled the bitcoin’s upside action with its daily Relative Strength Indicator (RSI). The celebrated cryptocurrency analyst noted that bitcoin’s RSI had surged deeply into its overbought territory, adding that the last time it happened was on December 6, 2017.
“Last time BTC was this overbought (RSI) on a daily chart was December 6, 2017, with price at $13700,” said Krüger. “Back then, a parabolic move ensued.”
Last time $BTC was this overbought (RSI) on a daily chart was December 6, 2017, with price at $13700. Back then, a parabolic move ensued.
— Alex Krüger (@krugermacro) May 11, 2019
Bitcoin is Bullish, Anyway
That said, the bitcoin price could trend further into its overbought territory, especially when mouth-watering upside targets between $7,000-$7,500 are within reach. But eventually, the asset could be looking at a massive correction. Based on the height of the ascending channel, bitcoin’s downside target could quickly close below $6,000.
That, however, does not make bitcoin a bearish asset. But the warning above could prove beneficial for those who have bills to pay in the near-term.