Just days in the past Bitcoin closed its month-to-month candle for September, marking three purple candles in a row for the primary time in 2019.
While this in itself could not appear important. The three purple candle closes have fashioned what may very well be a robust Japanese candlestick sample that indicators a significant development reversal and a a lot deeper drop forward. And if previous occurrences of the sample are something to go by, the crypto market could also be in for an prolonged crypto winter and probably a return to the depths of the bear market.
Bitcoin Price Closes Third Consecutive Monthly Red Candle
Throughout 2019, Bitcoin has been on an upward trajectory, and at its peak introduced traders who purchased the underside of its bear market as a lot as 350% returns. But beginning on the finish of June, Bitcoin’s bullish momentum started to fade, and the asset started buying and selling inside an more and more narrowing buying and selling vary.
July closed the primary month-to-month purple candle of the yr, setting Bitcoin’s first decrease excessive. Another rally in August resulted in yet one more decrease excessive, and yet one more purple month-to-month candle shut. At this level, it was clear Bitcoin was buying and selling in a triangle sample, nonetheless, analysts have been torn as to which course the formation could escape.
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Hope that Bakkt would gasoline Bitcoin’s rocket to the moon stored bulls preventing, however as soon as the platform launched on September 23, 2019, to abysmal buying and selling quantity and curiosity, bears took management and pushed Bitcoin’s value from $10,000 to beneath $eight,000––an over 20% drop––in lower than 48 hours.
The market fearing that Bitcoin’s bull run could also be in jeopardy sparked a sudden enhance in promote strain that stored September’s month-to-month candle shut within the purple but once more, marking the third consecutive candle shut in a row.
Worse but, the third shut in a row could have brought about Bitcoin value charts to kind an ominous reversal sample, and one that would lead to a robust downtrend within the weeks and months forward.
Three Black Crows: Does This Reversal Pattern Signal a Return to Crypto Winter?
The third consecutive month-to-month shut could have fashioned a robust Japanese candlestick sample ominously dubbed three black crows.
Wikipedia defines three black crows as a candlestick sample that “indicates a strong price reversal from a bull market to a bear market.” It is mostly––however not all the time–– discovered on the prime of an uptrend, and indicators a robust reversal.
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Leading as much as and throughout the sample, quantity diminishes, and on the third candle, it would shut on comparatively excessive quantity in accordance with an Investopedia entry on the topic.
Like many chart or candlestick patterns, a affirmation is required for the formation to be legitimate, and might solely be confirmed in hindsight. A affirmation of the three black crows formation could be a steep downtrend from right here. However, when buying and selling the sample, traders are suggested to observe for oversold situations earlier than an additional fall, on account of three consecutive bearish months exhausting among the promote strain.
The sample is way extra more likely to affirm if the sample seems on value charts of monetary property that coincide with different indicators flipping bearish. Further including credence to the speculation that this extraordinarily bearish and highly effective value sample could have fashioned on Bitcoin value charts, is a affirmation of three separate indicators: the MACD, Stochastic RSI, and an indicator referred to as the Fisher Transform.
Each of the three indicators has all turned bearish on month-to-month timeframes, suggesting that the development is altering in a significant manner.
Ominous Reversal May Signal Dangerous 50% drop and Second Leg of Bear Market
All issues thought-about, the development forward isn’t wanting constructive for Bitcoin. But how unhealthy can issues get? Most are sure that Bitcoin has bottomed and is constructing help for its subsequent bull run, however contemplating the final couple of occasions Bitcoin value closed three consecutive purple month-to-month candles in a row, excessive crashes adopted.
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Up till July’s month-to-month shut, each month-to-month candle earlier than it in 2019 closed inexperienced. But earlier than that, Bitcoin was popping out of certainly one of its deadliest drops ever––the breakdown from help at $6,000 in November 2018.
Prior to the huge November 2018 drop that resulted in one other 50% of Bitcoin’s worth worn out within the days following, Bitcoin closed not one, not two, however three consecutive purple month-to-month candles. Could an identical 50% drop come following the potential three black crows sample?
Looking additional again, previous to the November 2018 drop, Bitcoin hadn’t closed three consecutive purple month-to-month candles since 2014.
Following the highest of the 2013 bull market, Bitcoin value crashed. Much like what occurred in 2019, the crypto asset rallied from lows beginning in April, reclaiming a lot misplaced floor. But July, August, and September of 2014 closed three purple candles in a row. After that, Bitcoin value fell one other 50% and the market noticed the total extent of what the 2014-2015 bear market needed to provide.
History usually repeats itself and markets cycle. If Bitcoin has as soon as once more closed a 3 black crows candlestick sample, a 50% drop from right here could also be forward, very like has occurred up to now. The drop in 2014-2015 additionally took Bitcoin value to its true backside, which was a full retracement to the highest of the earlier cycle. If the identical factor occurs once more, Bitcoin’s true 2018-2019 bear market backside could also be nearer to $1,200 – the highest of the 2013 bull cycle.
Frighteningly for bulls, if the July, August, and September candle shut from 2014 is something to go by, Bitcoin’s bear market may simply be getting began, not coming to an finish.