- Litecoin and XRP have triggered the Parabolic SAR indicator on the 1M timeframe, hinting at a potential trend reversal.
- Bitcoin and Ethereum have yet to trigger the same signal, suggesting they may lag behind the lower-ranked altcoins.
Shedding Light on Parabolic SAR in Crypto Landscape
Cryptocurrencies are notorious for their explosive, parabolic price rallies, which often lead to drastic overvaluations. When this parabolic trajectory shatters, a merciless bear market typically ensues. Being able to discern these pivotal trend shifts can be the key to profitable crypto trading.
Certain analytical tools, like the Parabolic SAR (Stop and Reverse), are specifically designed to indicate when a trend has ceased and taken a U-turn. Conceived by J. Wells Wilder, Jr., the Parabolic SAR, along with other popular technical tools such as the Relative Strength Index and Average True Range, aids traders in discerning market trends.
The Emerging Narrative: Litecoin and XRP Lead the Charge
Applying the Parabolic SAR to the monthly timeframe across a spectrum of top crypto assets like Litecoin, XRP, Bitcoin, and Ethereum, it is observed that only LTCUSD and XRPUSD have tagged the Parabolic SAR. According to the logic of this tool, it should infer that the downtrend in these assets has stopped and reversed.
It may seem unusual for Litecoin and XRP to be leading the crypto market recovery. After all, Bitcoin and Ethereum both established new remarkable highs in 2021, while LTC and XRP did not. This variance could be triggering the signal earlier in LTC and XRP than in BTC and ETH.
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Sellers of LTC and XRP could be significantly more depleted having endured a longer drawdown from all-time highs. Both these altcoins outshone Bitcoin and Ethereum in 2017, suggesting the present scenario isn’t impossible.
For Bitcoin and Ethereum to stimulate the same Parabolic SAR signal, BTCUSD needs to ascend to nearly $42,000 per coin, while ETHUSD requires trading above $3,300. These targets stand afar, particularly when compared to Litecoin and XRP, which have already prompted the SAR to dip below the price action.
As it stands now, the Parabolic SAR can serve as a guide to establish a trailing stop loss. A stop loss order at the SAR indicator can be placed. When hit, it indicates to the trader a higher probability that the trend has stopped and reversed.
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