Crypto Update: Downtrend Looms for Binance Coin

Binance Coin/Bitcoin (BNB/BTC) is one of the few altcoins that’s in the green this year. The pair is up by over 145% year-to-date. The gains can be shocking, especially if you consider that most crypto pairs are down by 70% – 90%. That’s because BNB/BTC has been known to move against the general cryptocurrency market trend. The pair rose just as many popular altcoins started to plummet.

Recently, however, we’ve seen a good number of altcoins show bullish signals. If BNB/BTC counters the overall trend, then could it be possible that it is in danger of becoming bearish? In this article, we show how a major shift in the trend looms for Binance Coin.

Presence of Bearish Divergence

Seasoned traders know that a bearish divergence is a sell signal. It indicates that the market has lost its upward momentum. Thus, it would be difficult to sustain the ascent even if prices continue to rise. Without momentum, the market is in danger of reversing its trend.

Pull up the weekly chart of BNB/BTC and you’ll see a bearish divergence on the weekly chart.

Weekly chart of BNB/BTC

BNB/BTC managed to climb even though momentum was dissipating. Switch to the daily chart and you’ll see an even larger bearish divergence.

This indicator is telling us not to buy the recent dip. Chances are the uptrend is already over.

Emergence of a Reversal Pattern

On top of a bearish divergence, BNB/BTC is forming a head and shoulders reversal pattern on the daily chart. This is further evidence that upward momentum is disappearing. The lower high of 0.0019999 that the market generated on August 09, 2018 is a sign of weakness. This means that demand has significantly decreased.

Daily chart of BNB/BTC

Currently, BNB/BTC is struggling to stay on top of 0.0014 support. In addition, technical indicators show that a breach is on the horizon. Volume has been thin even though the market is just above the support. Also, the daily RSI has been generating a series of lower highs.

Without volume and momentum, BNB/BTC is at risk of triggering the reversal pattern.

Entrance into Bear Territory  

Technical analysts have different definitions of a bear market. One of the most common definitions used is an asset enters bear territory once it drops by 20% from its recent high. That’s because in a bull market, participants would consider a 10% – 15% dip as an opportunity to bargain hunt. With strong optimism, markets tend to bounce and resume the uptrend.

A 20% fall from the recent high generally means that participants are no longer optimistic about the market’s outlook. They are not racing to place long positions even though prices have significantly dropped because traders are afraid. We’re seeing this dynamic in BNB/BTC.

Fibonacci levels of BNB/BTC

BNB/BTC is hovering just above the 50% Fibonacci level. That means that the market has lost close to 50% of its value from the recent high of 0.0026555. Yet, buyers are scarce. When a significant number of participants realize that demand is not going to be as strong as it used to, they will very likely dump their positions. That should ignite the downtrend.  

Bottom Line

Binance Coin may be in the green this year but it appears that change is coming. With many popular altcoins showing signs of life, BNB/BTC is revealing reversal signals. These include the presence of a bearish divergence, the emergence of a head and shoulders pattern, and the entrance and stay in bear territory.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.