A recent drop setting a lower low on daily timeframes has potentially started a short-term downtrend.
And according to a trend measuring tool, this drop may have a lot further to go.
Bitcoin Sideways Is Over, Initial Drop Is Prelude To Short Term Downtrend
Discussion around Bitcoin over the last month has mostly been centreed around its sideways stability. With no price movement, crypto analysts are left to speculate on what might cause a breakout instead.
Despite positive news that PayPal and Venmo may soon launch support for cryptocurrencies.
The breakout id finally be underway, as Bitcoin price has now set another lower low on daily timeframes. A series of lower highs and lower lows is the definition of a downtrend, which may be beginning for Bitcoin.
The short-term downtrend is part of a longer downtrend lasting nearly three years now. A break up through resistance could possibly put an end to that downtrend once and for all.
But as this selloff picks up in severity, a trend measuring tool is suggesting that this downtrend has legs, and its just getting started.
Average Directional Index Signals Bear Trend Has Just Started
The Average Directional Index is a technical analysis indicator created by J. Welles Wilder, Jr. The market analyst and author also created the Relative Strength Index and the Parabolic SAR.
The Average Directional Index, or ADX, measures the strength of a trend. A reading of under 20 typically indicates a lack of a trend and anything rising above 20 shows that a trend is beginning.
The higher the reading, the stronger the trend. Higher readings also often suggest that the trend soon could reverse, while lower readings following a breakout suggest trends have more to go.
BTCUSD Daily Average Directional Index | Chart by TradingView
Further confirming a bearish trend may be starting, is a crossover of the two Directional Movement Indicators, depicted in green and red. Past bullish or bearish crossovers determined the direction of the trend in the past.
All these signals point to strong downside in Bitcoin and the rest of the crypto market.
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Disclaimer. This analysis and forecast are the personal opinions of the author that are not a recommendation to buy or sell cryptocurrency and should not be viewed as an endorsement by Cryptosavvy.co.uk. Readers should do their own research before investing funds.