Bitcoin Bull runs at risk as parabolic SAR turns bearish on daily chart

by James · May 8, 2023

Bitcoin (BTC), the world’s largest cryptocurrency, is facing a potential correction as it loses support at a critical level and is trading at $27,300. Technical analysis shows that the Parabolic SAR has turned bearish on the daily chart, indicating a possible downside soon time. Bitcoin’s price has also fallen below the 50 exponential moving average (EMA), a critical support level.

Parabolic SAR is a popular technical indicator for identifying potential trend reversals in the market. When the indicator turns bearish, it suggests that the asset’s price may be heading lower. In this case, the bearish signal on Bitcoin’s daily chart could mean that the cryptocurrency is due for a correction.

Fold for Bitcoin correction when support levels fail

According to trader and technical analyst Ali, If Bitcoin fails to sustain a close above the 50EMA level, it could confirm a potential correction to $26,200 or even $25,000. Furthermore, Bitcoin’s failure to hold the 50EMA as support is another warning sign for traders.

The 50EMA is a widely watched moving average that shows the average price of an asset over the past 50 days. When an asset price falls below this level, it can be seen as a bearish signal, indicating that the asset may be heading lower.

Currently, Bitcoin is down over 4% in the last 24 hours, trading below the 50EMA; this could confirm a potential correction to $26,200 or even $25,000, according to the analyst. These levels represent significant support zones for Bitcoin; the cryptocurrency could see a further downside if they fail to hold.

Furthermore, according to Ali, the Bitcoin network is showing signs of contraction, with declining user adoption and a series of lower highs and lower lows. This declining trend of wallet activity could signal a drop in Bitcoin’s price shortly.

As BTC adoption slows, so does demand for the cryptocurrency. This ultimately puts downward pressure on BTC’s price, as fewer people are interested in buying and holding the cryptocurrency. The trend of lower highs and lower lows seen in the Bitcoin network suggests that the cryptocurrency’s price may be heading for a correction.

Additionally, more bad news for Bitcoin bulls; Bitcoin’s largest whale address, owned by Binance, has been very active in the market, moving $2.26 billion worth of Bitcoin in just four transactions, according to Santiment data. This sudden movement has caused Bitcoin’s supply on exchanges to drop from 6.78% to 5.84%, indicating that the whale may transfer Bitcoin to a cold storage or escrow solution.

BTC Above $25500, signals long-term bullish trend

Despite recent market fluctuations, BTC is still showing a strong upward trend, according to analysis of the weekly BTCUSD chart by The Birb Nest, a cryptocurrency and investment platform. Furthermore, BTC is trading above the rising 200-week trend and the flat 50-week trend, which is a positive indicator.

The Birb Nest has pointed out that the uptrend is likely to continue if Bitcoin remains above the $25,500 level. However, crypto analytics firms are keeping a potential visit down to the $25,000 level. This level is seen as a key support level for Bitcoin, and a sustained hold above it could signal a positive outlook for the cryptocurrency.

Also, The Birb Nest has noted that there has been a weakening relationship between Bitcoin and S&P 500 prices in recent weeks. This is reflected in the 7-week correlation coefficient, which stands at 0.39.

BTC and SP500 correlation. Source: The Birb Nest on Twitter.

Although the correlation between Bitcoin and the S&P 500 has weakened, it remains positive. This suggests that both assets still share some similarities in terms of price movements. Therefore, if there are gains or losses in major stocks, Bitcoin is likely to be somewhat affected.