Bitcoin price is in a downtrend, after spending nearly a full year in a parabolic uptrend. An indicator bearing the “parabolic” name on monthly timeframes has given a signal, that according to past instances, has always resulted in a catastrophic fall in the top cryptocurrency by market cap.

Even if the resulting selloff ends up being the weakest ever following such a signal, it still could put Bitcoin at risk of a plunge to below $20,000 per coin. Here’s why.

2020 was the perfect storm for Bitcoin and the rest of crypto. Talk of inflation, a supply shock, and nations in turmoil caused investors to flock with the scarce and innovative emerging assets.

Institutions, hedge funds, and even corporations began to pay attention to Bitcoin, and the greater crypto market began to boom due to Ethereum, DeFi, NFTs, and Dogecoin.

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More big names have been drawn to the space than ever before, and Bitcoin is now in the portfolios of the wealthy around the world. The scramble to buy BTC before everyone else sent the price per coin on a parabolic uptrend, and took it from under $4,000 to more than $65,000.

All the attention helped take Coinbase public, but since then Bitcoin and the rest of crypto has been in a downtrend, and it could get a lot worse now that the parabola has been broken.

When Bitcoin price broke its parabolic advance in early 2018, iconic trader Peter Brandt famously called for an 80% correction, give or take a few percentage points on either side. A year later the leading cryptocurrency by market cap plummeted to its bear market bottom for a full 84% retracement.

A tool that can help tell traders when an asset has gone parabolic, and through that tool where to place stop losses, could be signaling that Bitcoin will drop a lot more now that again parabola has been broken – possibly as much as Brandt called for in the past.

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The technical analysis tool, called the Parabolic SAR can indicate when a trend has “stopped and reversed.” The recent selloff touched the Parabolic SAR on monthly timeframes, and in the past each time that happened, BTC dropped by 72% or more against the dollar. At the highest point the post-SAR plunge reached a staggering 86% – not far from the statistics shared by Brandt.

With the tool triggered, even at the lowest ever drop in history percentage wise, Bitcoin is still at risk of dropping below $20,000 or even lower. At even 84%, which we now know happens when parabola is broken, it could take the top crypto asset back to around $10,000.

Traders use the Parabolic SAR to move their stop losses up in profit, so the only hope left for bulls is that this level was hunted on purpose. The fall happened to coincide with the yearly open, so there are plenty of technical reasons for the target also.

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