The Bitcoin price is above $45,000 for the first time since April 2022 and according to the weekly Average Directional Index, the rally may not stop anytime soon. That’s because the trend strength metric is starting to show shocking similarities to the 2021 bull run.
Bitcoin Bull Run Deja Vu: 2021 vs. 2024
When Bitcoin is trending, it is wise to get out of the way. The same applies whether or not BTCUSD is in an up or down trend. Currently, the leading cryptocurrency by market capitalization is on an upward trend, according to the Average Directional Index.
The tool is designed to measure the strength of a trend on any time frame. When the ADX grows and rises above 20, it indicates that an active trend is in play. Below 20, and there is not enough evidence of a trend, which could indicate sideways price action.
Not only is the weekly ADX in Bitcoin above 20, but it is also above 51. Reaching above 51 at the end of 2020 resulted in a four-week increase of 120%. If a move of the same magnitude follows, BTCUSD could reach $94,000 per coin by mid-February.
Everything about the average directional index
The Average Directional Index is a trend strength measure designed by J. Welles Wilder, Jr., creator of other technical analysis tools such as
The ADX value in dark blue above shows the strength of a trend. However, the ADX is equipped with two turn signals, the DI+ and DI-. Not only is the ADX at the exact location of the late 2020, early 2021 bull run, but the DI+ in green and DI- in red are also at the same level.
This could indicate the same ripe conditions for a parabolic rally. In 2021, Bitcoin peaked when the ADX reached 85 and started falling back down. If BTCUSD breaches this level, we could be in for an even stronger rally than expected.
If it fails to break above 85 but still hits a new all-time high, a bearish divergence could warn of an impending top in crypto. Be that as it may, the ADX can be an important tool in understanding cryptocurrency trends.
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