It has been suggested that the price rally of Bitcoin could be overextended by several media outlets and experienced analysts. Even Cointelegraph Markets pro has got involved in this, as they have highlighted several indicators which suggest the above-mentioned statement.
Those bearish views also bring into account John Bollinger, the creator of Bollinger brands, who further suggested that traders should use a trailing stop- since signs of a top were building up. However, it is also important to note that Bollinger Bands and the indicator of Fear and Greed are metrics that are backward-looking. Therefore, it would also flash overbought levels at the time of a weekly rally of 30%.
Bitcoin Moving Through The Paces
For example, Nebraskangooner- a popular trader and YouTuber- has highlighted that the recent top of $56,000 could have also checked through the upper range of a bullish channel that has been guiding the cryptocurrency since late July. The indicator for BTC Fear and Greed does stay above 65, which indicates that most traders were overconfident. The metric will be using trading volume, social metrics, futures open interest which would calculate how hyped the market is.
It did take four weeks before a price correction for the cryptocurrency took place after the warning sign came up. Whoever sold in the first days after the flashing of the indicator missed out on the rally of 70% that followed. A similar pattern was seen between the 23rd of July and the 25th of August, which led to the continuous rally of Bitcoin prices.
However, there have been reports of a crash which could be potential if some bearish events take place in the near future of Bitcoin. This could very well be an exchange-traded fund request which could get denied or some United States ban on stable coins.