The price of Bitcoin has surpassed $45,000 for the first time since April 2022, and the weekly average directional index suggests the rise may not stop anytime soon. That’s because trend strength measuring tools are starting to show shocking similarities to the 2021 bull market.
Bitcoin Bull Run Deja Vu: 2021 and 2024
When Bitcoin is trending, it is wise to get out of the way. This is true regardless of whether BTCUSD is trending upward or downward. Currently, according to the Average Directional Index, the top cryptocurrencies in market capitalization are showing an upward trend.
This tool is designed to measure the strength of a trend for any time period. When ADX grows and rises above 20, it indicates that an active trend is emerging. If it is below 20, there is not enough evidence for a trend and the price is likely to move sideways.
Bitcoin’s weekly ADX is not only above 20, but also above 51. It reached above 51 at the end of 2020, up 120% in four weeks. If a move of the same magnitude follows, BTCUSD could reach $94,000 per coin by mid-February.
All About Mean Direction Index
The Average Directional Index is a trend strength measurement tool designed by J. Welles Wilder, Jr., who created the following technical analysis tools:
The dark blue ADX figure above shows the strength of the trend. However, the ADX is equipped with two direction indicators: DI+ and DI-. Not only is ADX in the exact position of a bull market in late 2020, early 2021, but DI+ in green and DI- in red are also at the same level.
This may suggest the same maturing conditions for a parabolic rally. In 2021, Bitcoin peaked with ADX reaching 85 and then began to fall again. If BTCUSD exceeds this level, we could see a much stronger rally than expected.
Even if it fails to break above 85, if it hits a new all-time high, a bearish divergence could be a warning that the cryptocurrency is about to reach a new all-time high. In any case, ADX can be an important tool for understanding cryptocurrency trends.
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