What are the bottom and top signals of cryptocurrencies?

Cryptocurrency bottom signal

• Market panic: When the cryptocurrency fear and greed index is at an extremely low level, such as close to 0, it indicates that the market is filled with panic. At this time, investors are generally pessimistic, selling their assets in large quantities, and the prices are often over-pressed, which may be a signal that the market is close to the bottom. For example, in some extreme market conditions, the price of Bitcoin fell rapidly, and investors fled in panic, and then often ushered in a rebound in prices.

• Extremely shrinking trading volume: During the continuous decline of prices, if the trading volume gradually decreases to extremely low levels, it means that the enthusiasm of market participants has dropped to freezing point and the seller's strength is almost exhausted. This is like the calmness after a storm, often the prelude to appear at the bottom. Taking Ethereum as an example, in a specific bottom area, its trading volume dropped significantly compared to its peak period, and then a new round of rising market started.

• Technical indicators oversold: Some technical indicators such as the Relative Strength Index (RSI) enter the oversold range (usually the RSI is below 30). This shows that cryptocurrency prices have fallen too hard in the short term and there is a rebound demand. When RSI diverges in the oversold range, that is, the price continues to hit a new low but RSI no longer hits a new low, it is a strong bottom reversal signal.

Cryptocurrency top signal

• Extremely greedy market: Investors are overconfident and optimistic when the cryptocurrency fear and greed index reaches 100 and appear extremely greedy. At this time, a large amount of funds poured into the market, driving irrational price rises and forming a price bubble, which is a clear top signal. For example, Bitcoin is at the top of some stages, and the market is filled with extreme greed. After the price rises rapidly in the short term, it begins to pull back sharply.

• Trading volume increases sharply but price stagnation: During the price increase, if the trading volume suddenly increases significantly, the price cannot continue to rise sharply, forming a divergence of volume and price. This shows that although there is a large amount of capital buying in the market, the selling pressure above is huge, and it is difficult for the price to break further, indicating that the top may come. For example, some popular altcoins often show the top signal of this kind of volume and price divergence during the peak period of speculation.

• Analysts are generally bullish: When almost all analysts consistently give very optimistic price forecasts and the market is full of good news, it is often a manifestation of overheating. At this time, market sentiment has been over-inspired and the price may be close to the top. For example, near the highs of some cryptocurrencies, many analysts have given higher target prices, and the market has taken a sharp turn for the worse.