Experienced analysts and media stores which include Cointelegraph lately highlighted a few signs suggesting that the Bitcoin (BTC) charge rally may be overextended.

Those bearish perspectives consist of one from Bollinger bands author John Bollinger, suggesting buyers use a trailing stop, as symptoms and symptoms of a “pinnacle” have been constructing up.

However, it’s far really well worth noting that Bollinger Bands and the Fear and Greed indicator are backward-searching metrics. Therefore, the ones will commonly flash overbought degrees on every occasion there’s a 30% weekly rally, including the maximum latest one.

As crypto analyst TechDev_52 effectively questioned, there’s no manner to understand whether or not we’re coming into a huge ability correction or a rally continuation.

For example, famous YouTuber and dealer Nebraskangooner suggests that the latest $56,000 pinnacle might have been the top variety of a bullish channel that has guided Bitcoin because overdue July.

“Greed” mode can closing for weeks or months

Going again to the Fear and Greed indicator, underneath are a few examples that this kind of metric can preserve overbought degrees for longer than 3 or 4 weeks.
Bitcoin ‘Fear & Greed’ index (above) and Bitcoin charge at Bitstamp (underneath). Source: btctools.io, TradingView

Notice how among Jan. 29 to Feb. 26, the Bitcoin Fear and Greed indicator remained above 65, indicating that buyers have been overconfident.

The metric makes use of buying and selling volume, futures open interest, social metrics and seek statistics to calculate how hyped the marketplace is.

Thus, it took 4 weeks earlier than a tremendous Bitcoin charge correction befell after the caution signal popped up. Whoever bought withinside the preliminary days after the indicator flashes neglected the 70% rally that followed.

A comparable sample took place among July 23 and Aug. 25, at the same time as the Bitcoin charge persevered to rally. Yes, a correction will continually come at a few point, however what number of weeks or months later?
Bollinger Bands, an amazing short-time period indicator

John Bollinger is an skilled and well-reputable dealer, however his indicator is the shifting common plus a few deviation primarily based totally at the cutting-edge volatility. In short, a 30% weekly circulate can be out of doors this variety maximum of the time, thinking about Bitcoin’s regular 4.5�ily volatility.
Bitcoin charge at Coinbase the use of 20-day Bolling Bands. Source: TradingView

Certainly, a minor correction has a tendency to comply with thru while Bitcoin breaks the top Bollinger band, however that has virtually 0 correlation to the charge a few to 4 weeks ahead.
The investment fee has been neutral

Lastly, one need to examine the investment fee, a price charged through derivatives’ exchanges to stability the hazard among longs (customers) and shorts (sellers) as their leverage varies. Sure enough, while a shopping for spree takes place, the indicator is going up.
Bitcoin 8-hour perpetual futures investment fee. Source: Bybt.com

The cutting-edge 0.04% common fee in step with eight-hour, or 0.8% in step with week, is not anything out of the ordinary. Back in December 2020, for example, it stayed above 1.5% in step with week for an entire month, and however in February 2021.

Similar to the Fear and Greed indicator, this metric suggests that customers have become overconfident because it surpasses 0.10% in step with eight-hour, however now no longer always an alarming level.

As lengthy as customers are assured that the rally will continue, paying a 1.5% or maybe 3% weekly price won’t pressure them to shut the leverage longs. For example, if a Bitcoin deliver scarcity on exchanges has brought on the latest rally to $56,000 as holders accumulate, there is probably room to $80,000 or higher.

However, a crash may be anticipated if a few bearish occasions arise withinside the close to future, including exchange-traded fund requests being denied or a few draconian United States ban on stablecoins. In such an event, Bitcoin will now no longer breach the best-ever excessive, and people backward-searching metrics will finally “work.”

The perspectives and critiques expressed right here are totally the ones of the writer and do now no longer always mirror the perspectives of Cointelegraph. Every funding and buying and selling circulate includes hazard. You need to behavior your personal studies while creating a decision.