A significant bearish signal has appeared on Bitcoin’s weekly chart, raising concerns of a potential market downturn. The SuperTrend indicator, a tool used by traders to identify market trends, has flipped negative for the first time since January 2023, a development that has historically preceded steep price corrections.

A Pattern of Steep Corrections

The SuperTrend indicator functions similarly to a moving average but incorporates the average true range into its calculation to better gauge market volatility and direction. Last week, the indicator turned from green to red and moved above Bitcoin’s price, generating a “sell” signal. This technical event was reinforced when Bitcoin closed below its 50-week moving average, a scenario that has historically marked the end of bull markets.

Past occurrences of these combined signals have led to severe drawdowns. Following similar indicators in the 2018 and 2022 bear markets, Bitcoin’s price fell by 84% and 77%, respectively. Crypto analyst Bitcoinsensus noted that while not a certainty, these could be early signs of a new bear market beginning to form.

Market Sentiment Echoes Technical Warnings

Adding to the cautious outlook, the Crypto Fear & Greed Index has fallen into the “extreme fear” category, registering a score of 11, its lowest since February. This sharp drop in market sentiment suggests investors are increasingly worried, and historical data presents two distinct possibilities for what could happen next.

One scenario mirrors the market action of 2021. During that period, the index fluctuated in the “extreme fear” zone for months, and Bitcoin’s price dropped an additional 40% before eventually rallying to a new all-time high of $69,000 later that year. Analyst Milk Road suggested that while more short-term pain is likely, a reversal in the coming weeks could still keep a medium-term rally on the table.

The second, more bearish scenario resembles the start of the 2022 crypto winter. In May of that year, the index also plunged into “extreme fear” and remained there for several months, marking the most intense phase of the bear market that saw Bitcoin collapse from its $69,000 peak to lows around $15,000.

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