A technical indicator that predicts parabolic rallies has not triggered for Bitcoin (BTC) and Ethereum (ETH), the two largest cryptocurrencies. This suggests that BTC and ETH may underperform compared to lower-ranked altcoins like Litecoin (LTC) and XRP in which the indicator has recently triggered. The lack of this “parabolic” buy signal for Bitcoin and Ethereum implies these leading cryptos could lag behind other altcoins that the indicator forecasts will experience substantial rallies.
The Parabolic SAR in Crypto: An Explanation
Cryptocurrencies are known for their dramatic, parabolic price rallies that eventually result in overvaluation and reversal into brutal bear markets once the parabola breaks down. Detecting when these trend shifts occur is key to crypto trading profitability.
Technical indicators like the Parabolic SAR, created by noted technician J. Wells Wilder Jr., are designed to identify trend reversals. The Parabolic SAR signals when a downtrend has stopped and reversed into an uptrend.
Analyzing the Parabolic SAR on the 1-month timeframe for major cryptocurrencies shows it has triggered a reversal signal only for Litecoin and XRP, and not yet for Bitcoin and Ethereum. Based on how the indicator functions, this suggests Litecoin and XRP’s downtrends have reversed, while Bitcoin and Ethereum lag behind and may continue to face downward price pressure in the near term. The data indicate Litecoin and XRP could soon rally while Bitcoin and Ethereum may underperform.
Why Litecoin and XRP May Outperform Bitcoin and Ethereum
It is atypical for Litecoin and XRP to potentially lead a crypto market recovery when Bitcoin and Ethereum set new all-time highs in 2021 while LTC and XRP did not. This divergence could explain why the Parabolic SAR reversal signal triggered earlier for Litecoin and XRP compared to Bitcoin and Ethereum.
One factor is that LTC and XRP sellers may be far more exhausted after enduring a much longer drawdown from their respective all-time highs versus Bitcoin and Ethereum. Litecoin and XRP also dramatically outperformed Bitcoin and Ethereum back in 2017, so there is precedent for them leading rallies, despite not doing so recently. While unusual, Litecoin and XRP spurring the next crypto upswing ahead of Bitcoin and Ethereum is plausible given how oversold they are relative to their 2017 peaks.
For the Parabolic SAR reversal signal to trigger in Bitcoin and Ethereum, BTC would need to reach around $42,000 and ETH would need to exceed $3,300. These price levels remain distant compared to Litecoin and XRP which have already triggered the indicator’s bullish reversal.
Now that the Parabolic SAR has flipped to below the price action for Litecoin and XRP, it can be used to set trailing stop losses. Traders could place stop orders at the SAR indicator level, which would close out positions if the uptrend stops and reverses as projected by the tool.
This highlights how the Parabolic SAR has already called a trend change in Litecoin and XRP, while Bitcoin and Ethereum continue lagging behind without a bullish reversal signal yet. The data suggests LTC and XRP may lead the next crypto rally.
