Bitcoin had a big breakout last night, bringing the asset to well over $ 20,000 to wrap up the stellar year for the cryptocurrency.
While 2020 was a monumental year for many reasons, it also marks a milestone for Bitcoin, setting a record for the longest weekly uptrend in the asset’s history, according to a “parabolic” indicator.
Bitcoin going parabolic after the longest weekly uptrend in crypto history?
Although there have been very few complete market cycles in cryptocurrencies, there have been at least three bull runs and two prolonged bear phases. The second bearish phase only recently ended, so very little remains for comparison.
However, due to the repeating patterns, it is evident that once Bitcoin crosses its previous all-time high, the asset will become parabolic for almost a year after that.
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The resulting uptrends are the strongest momentum on the asset’s price chart and provide a proven ROI between 2,000 and 5,000% in the previous two parabolic phases.
The third time is already proving to be the stimulus, as Bitcoin has already set a record for the longest weekly uptrend in its 12-year history, according to the Parabolic SAR indicator. It is also noteworthy that after the collapse of Black Thursday, this feat was achieved in one of the most unprecedented years to date, before a new record was set.
Is Bitcoin going parabolic? And what else does the parabolic SAR indicator tell us?
A new record is set for the longest weekly positive string of SAR | Source: BTCUSD on TradingView.com
Understanding the parabolic stop and reverse gear technical indicator
Bitcoin is expected to enter a parabolic phase every day, and this could already have happened considering how strong the uptrend has been so far. However, the parabolic SAR indicator itself is not used to decipher if and when this happens. However, it can help to understand if and when this parabola was broken.
In the graphic above, the parabolic SAR shows the greatest strength of the weekly positive “SAR” as part of the price campaign. This upward movement lasted over 200 days. The next longest uptrend on a weekly basis was the 2017 rally, which saw the asset rise to $ 20,000 for the first time.
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The indicator itself is among the easiest to use, but the uses themselves vary. When the price move crosses a SAR point and closes, this is a signal that the trend has reversed sufficiently and the parabola has been broken.
Note that in the graph above, the last change in trend was during the Black Thursday sell-off, but nothing but a slope since then.
Monthly timeframes suggest the uptrend just started | Source: BTCUSD on TradingView.com
Traders can use the parabolic SAR indicator developed by J. Welles Wilder, Jr. as part of a trailing stop strategy that moves a stop loss up or down along with each SAR point. The idea here is that if and when the stop is hit, it will hit at a point in profit where the trend has already reversed anyway.
The creator of the tool also designed the Average Direction Index, Average True Area, and Relative Strength Index. The tool suggests that while the weekly uptrend was already at a record breaking point, monthly timeframes show that things are only now beginning.
Featured image from Deposit Photos, Chart from TradingView.com