Bitcoin’s value has soared past the $45,000 mark for the first time since April 2022, and current indicators suggest that this cryptocurrency ascent may withstand the sands of time. The key metric stirring the pot of excitement is the weekly Average Directional Index (ADX), which is now showing startling resemblances to the euphoric days of the 2021 bull run.
For the uninitiated, when Bitcoin is in motion, it’s advisable to either hop on the ride or step aside. Such momentum applies both to its upward surges and downward spirals. Presently, the reigning champion of cryptocurrency by market capitalization is on the climb, a sentiment echoed by the ADX. This tool is not just any instrument; it’s designed to gauge the strength of a trend across various timeframes. A rising ADX that tips over the mark of 20 signifies that a trend is afoot. On the other hand, a reading below 20 could imply a lack of directional momentum, predicting potential sideways movement.
Now, not only does the weekly ADX for Bitcoin stand tall above 20, but it has also climbed to a remarkable 51. Such heights were last achieved in late 2020 and led to a staggering 120% surge in just four weeks. If history dares to repeat itself, BTCUSD could very well be on its way to an estimated $94,000 per coin by the time mid-February rolls in.
Delving deeper into the mechanics, the ADX is a brainchild of J. Welles Wilder, Jr., also known for his contributions to other technical analysis tools. The ADX, painted in a confident shade of dark blue, quantifies the momentum of a trend. However, it does not work alone; it’s complemented by two Directional Indicators—the DI+ and DI-. Currently, not only is the ADX’s reading reminiscent of the bull run we witnessed between late 2020 and early 2021, but the positions of DI+ in green and DI- in red mirror that golden era as well.
This noteworthy alignment suggests the potential ripening of conditions for another exhilarating parabolic ascent. In the previous cycle, Bitcoin’s value peaked as the ADX hit 85 before descending. Surpassing this threshold in the current cycle could indicate an even more formidable rally than previous anticipations.
Conversely, if the ADX fails to breach the 85 level but Bitcoin still charts a new high, we could be warned of a bearish divergence signaling a possible peak in the cryptocurrency market. In either scenario, the ADX stands as a beacon for those navigating the often tumultuous seas of cryptocurrency trends.