Bitcoin price peaked at $ 19,500 this week after a six-week rally of 60%. From the moment the first cryptocurrency hit more than $ 12,000 in three days, there have been twelve consecutive green candle closings with no red.
The extreme bullish momentum caused a particular technical indicator to hit the highest level in history – just three times before, all before 2014. Each time there was an average correction that saved two-thirds of the Bitcoin price after the momentum finally fell had turned down. Will this unstoppable rally be followed by a historic sell-off?
Bitcoin price hard corrects after failed retest of all-time high, but more is to come
The price per BTC has nearly doubled since early September, triggering an explosive FOMO rally that has only just ended.
The cryptocurrency went parabolic after falling over $ 12,000 and news broke that PayPal would support cryptocurrencies. But if Bitcoin didn’t break its all-time high, it would be hard to refuel.
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The run-up caused that Technical indicator for Fisher Transform to achieve one of four of the highest values in the slightly more than ten-year history of the cryptocurrency.
Interestingly, the extreme deviation of 7.5 or more hasn’t happened since before 2014, when few knew what a cryptocurrency was or had heard of Bitcoin. However, looking back at these past examples could indicate that a very dangerous situation is brewing.
The Fisher Transform has reached the highest reading in its history for the fourth time ever. | Source: BTCUSD on TradingView.com
Fisher Transform: An overcorrection could be due for the first cryptocurrency
During the very first Bitcoin bull market, the Fisher Transform indicator hit three times as extreme. The first time the asset ran hot resulted in a 48% retreat.
The second resulted in a full retracement of 80%, and the third launched the first Bitcoin bear market between 2014 and 2015 after an initial decline of 64%. Now the signal is back and, taking the average of the three corrections and extreme readings, an estimated two-thirds of the price per BTC could be different.
Past corrections suggest that cryptocurrency is about to correct hard. | Source: BTCUSD on TradingView.com
The corrections in the Bitcoin bull market during the last cycle averaged only between 37% and 38%. During the first bull market, the average was closer to 64%.
The two areas of correction for the bull market could be potential targets in the event that downside moves are reversed. The first of the two targets is right where the bullish breakout at $ 12,000 took place.
The second, with a return of 64%, would bring the Bitcoin price back to $ 7,000 per BTC. Extreme as it sounds, cryptocurrency has been known to overstretch in both directions. A sharp move could turn out to be a sharp move after 2020 profits.
A full 64% correction is possible, or will it be the 37% average from last bull market? | Source: BTCUSD on TradingView.com
The middle of the two targets is also a likely scenario, hovering around $ 9,200, which would fill one of the remaining CME gaps on the Bitcoin futures chart.
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Regardless of the ultimate goal, successfully buying the dip could be the most profitable game in Bitcoin history.
Featured image from Deposit Photos, Charts from TradingView.com