Bybit Arbitrage is a trading tool that simplifies arbitrage trading by capitalizing on funding rate and price differences.

If you're seeking consistent returns with minimal risk, Bybit Arbitrage is the perfect ally.

 This robust tool empowers you to generate regular profits with minimal risks by capitalizing on price disparities across different markets. Its user-friendly interface lets you easily spot and exploit these differences, so that you can execute flawless arbitrage trading in the crypto market with confidence. Read on to learn how Bybit Arbitrage makes arbitrage trading an effortless way for you to achieve low-risk gains.

 is the buying and selling of the same or similar asset(s) at the same time across different markets to earn from slight price deviations. This act of purchasing an asset at a fixed price — while simultaneously selling it at a higher price — allows a trader to instantly make profits without any risks. 

While arbitrage trading has long been a staple in traditional financial markets, such as stock and forex, the advent of crypto trading has propelled arbitrage trading to new heights — thanks to the heightened volatility of the crypto market. Additionally, unlike traditional stock markets, crypto markets are traded 24/7, offering more opportunities for arbitrage traders to reap profits from the price gaps across exchanges and markets. 

 across exchanges or within a single exchange. Keep in mind that if you opt to arbitrage trade across different platforms, accessing your profits may prove to be complex, due to the need to transfer your assets between the exchanges, which can take up to several days to complete. On the other hand, arbitrage trading on a single platform is more straightforward — but more competitive as well.

There are multiple arbitrage trading strategies, but the most common ones in the crypto market include funding rates arbitrage, spot-futures arbitrage and futures arbitrage. 

Funding rates arbitrage allows traders to profit from variations in funding rates between 

 contracts. In contrast, spot-futures arbitrage enables traders to profit from price disparities between the spot and 

 for the same asset. Meanwhile, futures arbitrage involves profiting from price discrepancies between futures contracts with different expiration dates.

Bybit Arbitrage is a trading tool that helps traders identify arbitrage trading opportunities in two ways: funding rate and spread. 

The user-friendly interface organizes trading pairs based on either funding rates or spreads in different markets, so that traders can easily spot disparities in funding rate or price across the markets at a glance. 

Bybit Arbitrage is exclusively available to 

 mode. It facilitates arbitrage trading for USDT Perpetual, USDC Perpetual and USDC Futures contracts, thereby allowing you to enjoy arbitrage trading opportunities between USDT 

Spot pairs and USDT Perpetual pairs, or USDC Spot pairs and USDC Perpetual/Futures pairs. 

The Funding Rate Arbitrage feature exploits differences in funding rates between the Spot and Perpetual/Futures markets on the Bybit exchange. With the Funding Rate feature, traders can earn funding fees while simultaneously managing their positions in order to minimize potential losses and maximize gains through positive and negative arbitrage strategies.

Funding rates for the different trading pairs are listed in descending order. This helps traders to easily leverage the interest rate differential between Spot and Perpetual/Futures contracts.

The Funding Rate feature also allows you to 

 orders (with the same amount, but in different directions) in both Spot and Perpetual/Futures, which enables you to earn funding fees while mitigating potential losses (with potential gains).

holders in Futures/Perpetual contracts pay short position holders. You can leverage this situation by executing a positive arbitrage, which involves

 buying a Spot pair and taking a short position in 

Perpetual to earn steady funding fees. Alternatively, if the funding fee is negative, short position holders pay long position holders. In this case, you would perform a negative arbitrage by shorting a Spot pair and going long in a 

The Spread Arbitrage feature helps traders capitalize on price discrepancies between different markets for the same cryptocurrency asset. With this feature, you can easily compare the market prices of an asset traded across various trading pairs and contracts. While Spread Arbitrage may be similar to spot-futures arbitrage, it offers more arbitrage opportunities since it covers a broader range of markets, unlike spot-futures arbitrage, which targets specific markets

With Spread Arbitrage, the aim is to profit from the eventual price convergence as you buy the crypto asset at a lower price in one market (e.g., Spot) and sell it at a higher price in another market (e.g., Futures). 

As the futures price will eventually align with the Spot price when the contract expires, you’ll be able to take advantage of the simultaneous price disparity for the same asset.

In order to trade with Bybit Arbitrage, you’ll first need to 

. Currently, Bybit Arbitrage is exclusively accessible via the 

 for the web version, which will be launched soon!

Bybit Arbitrage offers multiple advantages.

Bybit Arbitrage is a powerful tool for traders seeking low-risk gains in the volatile crypto market. With its intuitive interface and exclusive features, traders can effectively leverage funding rate and price differences to maximize profits while minimizing risks. Bybit Arbitrage offers diverse benefits that make arbitrage trading more accessible and profitable than ever before.

Beginner

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How to Use Bybit Arbitrage to Achieve Funding Rate and Price Difference Arbitrage

An Ethereum Spot ETF is an exchange-traded fund that tracks the real-time price of Ether and allows investment through traditional stock markets. Learn more.

Earlier this year, the U.S. Securities and Exchange Commission (SEC) gave the green light to a number of Bitcoin Spot exchange-traded funds (

), sparking optimism that similar approval might be extended to Ethereum Spot ETFs. Adding to the excitement, news of Ethereum Spot ETF approval in Asia’s first region has heightened anticipation for a potential approval and launch in the U.S. However, despite the buzz, some industry observers remain skeptical. This article explores the potential impact of Ethereum Spot ETF approval on the broader crypto market.

An Ethereum Spot ETF is an exchange-traded fund that tracks the real-time price of 

 and allows investment through traditional stock markets. It offers investors a way to invest in Ether without having to actually buy or hold the asset itself.

An Ethereum Spot ETF operates by pooling investor funds to purchase Ether, which is held in reserves by the ETF.

Rather than navigating the complexities of 

 and exchanges, investors buy shares of the ETF through regular brokerage accounts, just as they would with traditional stocks. These shares represent a stake in the Ether held by the ETF, providing a simple and regulated way to own Ethereum indirectly.

In order to create ETF shares, authorized participants — usually financial institutions — purchase Ether in exchange for ETF shares of equal value, which are then sold onto the market. An authorized participant can also redeem shares by buying enough ETF shares and exchanging them for Spot Ether and taking those shares away from the market.

As a result, the price of ETF shares tends to fluctuate in line with Ethereum's Spot market price. If it didn’t, there would be an 

 opportunity to profit from any mispricings in the ETF price. However, it’s still theoretically possible for the ETF to trade at different prices simply because of supply-and-demand factors.

ETFs as securities are regulated by the SEC, so an Ethereum Spot ETF provides a regulated product that investors can purchase. By contrast, Spot Ether is being investigated by the SEC to determine whether it should be classified as a security, and currently lacks regulatory clarity. 

This setup offers numerous benefits for investors. It simplifies the investment process, allowing anyone with a brokerage account to invest in Ethereum without setting up a crypto exchange account or managing storage. This can save time and give some investors greater peace of mind. An ETF structure also provides the regulatory clarity that institutional investors need, which can enhance liquidity and trading volumes.

Security is paramount in the realm of cryptocurrency, and the ETF provider takes it seriously. To safeguard Ether holdings, ETF providers employ a combination of 

 and insured custodial services. As a result, they could potentially minimize the risk of theft or loss that individual crypto investors may encounter.

The Ethereum Spot ETF bridges traditional finance (TradFi) and the exciting (but still growing) cryptocurrency space. It offers the security and ease of trading associated with traditional financial markets while opening up investment opportunities in Ethereum for a broader audience.

Both excitement and regulatory scrutiny characterize the current landscape of Ethereum Spot ETFs. Major financial institutions like 

 and Fidelity have submitted applications for these ETFs to the SEC. Still, decisions have been delayed, with the next 

If applicants begin updating their filings by April, this may indicate they’re incorporating feedback from the regulator, which could be interpreted as a positive sign. However, a lack of updates to filings could indicate that the SEC isn’t maintaining the same level of discussions with issuers that led to its 

Another challenge is that the SEC is still investigating whether Ether should be classified as a security, especially since it transferred its consensus mechanism to 

. Earning rewards through staking could meet criteria that determine whether an asset is a security. Ethereum also provides a foundation for 

 (DeFi), which could add to the complexity of the review. 

Analysts' opinions vary regarding the likelihood of ETH ETF approval. One Bloomberg analyst, for instance, 

 chance of approval by May. However, the SEC's recent silence might hint at a less favorable outcome.

The approval of Ethereum Spot ETFs is eagerly awaited because it could mirror the impact of Bitcoin Spot ETF approval, which led to an influx of capital in the market. It would mark a pivotal milestone, likely to attract increased investment and further validate cryptocurrency. The crypto community is closely monitoring these developments, as the coming months will be crucial in shaping the future of Ethereum investment opportunities.

 was recently given to the first Spot Bitcoin and Ethereum ETFs in one of the Asian regions. This landmark decision positions the city as a trailblazer in the Asian financial landscape, embracing the integration of popular cryptocurrencies into mainstream investment avenues.

This milestone has sparked excitement within the crypto community, indicating a positive reception toward digital assets in that region. Analysts believe this move could set a precedent for other jurisdictions to follow, potentially leading to broader acceptance and recognition of cryptocurrencies as a legitimate asset class.

These newly approved ETFs are expected to attract a wave of fresh investors — both retail and institutional — by offering a regulated and familiar investment option for exposure to cryptocurrencies. This growth of interest could increase stability in the crypto markets, possibly influencing the price movements of Bitcoin and Ethereum in the region.

The timing of this approval is noteworthy, considering that the U.S. could also be on the cusp of approval of an Ethereum Spot ETF. If this proactive approach inspires other financial centers beyond the U.S. to consider similar approvals, it will palpably contribute to the global expansion and maturation of the cryptocurrency market.

Current Impact of Ethereum Spot ETF Applications on the Crypto Market

The buzz surrounding Ethereum Spot ETF applications is noticeably affecting the crypto market, particularly Ethereum's price and overall sentiment. Submission of new ETF applications to the SEC has coincided with an 

, pushing it to around $3,700. This uptick reflects the market's optimism and positive sentiment regarding the potential for easier access to Ethereum. However, the market has exhibited some volatility as well, with Ether dropping over 14% in a week in early April. 

Despite these fluctuations, there's a general expectation that ETF developments would significantly impact Ethereum's price dynamics, similar to what was observed with the recent Bitcoin Spot ETF approvals. Moreover, the recent approval of cryptocurrency ETFs has further fueled optimism and positive expectations for increased investment inflows and a broader recognition of cryptocurrencies.

To sum up, the current impact of Ethereum Spot ETF applications on the crypto market is marked by heightened anticipation along with some volatility. Ethereum's price is responding to changes in the regulatory landscape and the potential for broader adoption of cryptocurrency-based investment products.

What Will It Mean if an Ethereum Spot ETF Application Is Approved?

The approval of an Ethereum Spot ETF application by the SEC would mark a significant milestone for the cryptocurrency market, especially for Ethereum. Following are some of the potential benefits.

Drawing parallels to the earlier Bitcoin Spot ETF approvals, some pundits expect an initial surge in Ethereum's price following the expected announcement, reflecting renewed confidence and interest in Ether as an asset. Over the long term, Ethereum Spot ETFs could contribute to growth and stability, similar to the impact that Bitcoin Spot ETFs have had on BTC’s price.

However, there are key differences to consider. The SEC's cautious stance on Ethereum — notably because of its PoS consensus mechanism — could influence the approval process and subsequent market reactions. In addition, Ethereum's unique ecosystem, including its role in DeFi and 

, could lead to different market responses as compared to those following the Bitcoin Spot ETF approvals.

The potential approval of Ethereum Spot ETFs is a crucial turning point for the crypto market, promising easier access, increased investment and greater legitimacy. Although short-term price fluctuations may occur, the long-term effects could echo the positive growth recently witnessed with Bitcoin Spot ETFs, promoting a more mature investment environment for Ethereum.

Intermediate

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Ethereum Spot ETF Approval: Its Impact on Crypto Markets

Grayscale Investments has filed a registration statement on Form S-3 with the SEC to register shares of its Grayscale Ethereum Trust (ETHE) as part of efforts to uplist the trust to a spot Ethereum ETF on the NYSE Arca.

Daily Top Performer — Automata Network (ATA)

The SPX index is up 0.02%, investor focus on earnings and U.S. interest rates continues. The broader cryptocurrency market is down, with Bitcoin and Ether dropping by 3.78% and 2.41%, respectively in the past 24 hours.

Today’s outperformer is ATA, which jumped 8.9% after Automata launched Multi-Prover AVS on Eigenlayer Holesky Testnet to boost decentralized security.

Automata Network (ATA), founded in 2019, is a Web3 platform providing private web services for decentralized applications, focusing on secure, anonymous transactions and governance. Key features include a private voting system and MEV minimization to enhance user privacy and security. Automata's Multi-Prover AVS, which utilizes TEE Coprocessors to enhance security, is now available on the Eigenlayer Holesky testnet. This system employs the TEE Prover as a secondary security measure in decentralized systems. Operators, restakers, and developers are encouraged to learn more about this advancement on their website.

Check Out the Latest Prices, Charts, and Data of 

Grayscale Investments, the world's largest crypto asset manager, has filed a registration statement on Form S-3 with the SEC to register shares of its Grayscale Ethereum Trust (ETHE) as part of efforts to uplist the trust to a spot Ethereum ETF on the NYSE Arca. This filing follows NYSE Arca’s application and is a crucial step in the regulatory process required for offering shares continuously upon approval. The shares will not be sold until the registration is declared effective, and this offering is subject to the Securities Act of 1933. Grayscale emphasizes that the trust, not registered under the 1940 Act, involves high risk and volatility, is focused solely on Ethereum, and does not offer direct investment in Ethereum.

BlackRock's spot bitcoin ETF, IBIT, has significantly impacted the firm's overall ETF flows, comprising 24% of its total. Eric Balchunas, Bloomberg's Senior ETF Analyst, highlighted the fund's success during a panel on Hong Kong's newly approved spot crypto ETFs. Since its launch in January, IBIT has attracted consistent inflows for over 70 days, accumulating more than $18 billion in assets under management and becoming one of the most successful ETFs in history. The IBIT fund is second only to Grayscale's ETF in terms of assets but has seen remarkable trading volume along with other spot bitcoin ETFs, totaling nearly $230 billion.

Gamium, supported by Parachain Ventures, DAO Maker, and Mr. Beast among others, has its token $GMM listed on major exchanges with a fully diluted valuation of around $43M. The platform is promoting a beta points airdrop to reward early users, where participants can sign up and earn points through various activities like launching an MST, trading, daily logins, and referrals. Details on point earning and distribution are available in a dedicated blog post. However, potential users are cautioned to research due to the inherent risks associated with DeFi protocols and trading.

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Grayscale Files for SEC Registration to Convert Ethereum Trust into a Spot ETF on NYSE Arca

Sharky is a Solana-based lending and borrowing DeFi solution that utilizes NFTs as loan collateral.

Cryptocurrency lending and borrowing has always been a prominent niche of the decentralized finance (

) industry, championed by platforms like Aave (

). A much rarer variant of DeFi borrowing and lending is based on non-fungible tokens (

Sharky.fi, or simply Sharky, is a Solana-based lending and borrowing protocol that uses NFTs as collateral to facilitate the DeFi processes on the network. By putting up NFTs as collateral, users can borrow funds via short-term loans in Solana's native SOL tokens. For lenders, the platform is also a great way to earn high APY rates in just 7 to 14 days, while having their loaned funds protected by the NFTs.

Having established itself as the leader of NFT-based lending and borrowing on Solana, the Sharky project has ambitious plans to integrate two more highly popular crypto asset types — Ordinals and real-world assets (RWAs).

 (SHARK) is a lending and borrowing app on the 

 (SOL) blockchain that lets users provide NFTs as collateral to access short-term loans in SOL tokens.

 Lenders can view NFTs offered as collateral, and make loan offers secured by their preferred NFTs.

Although Sharky's public launch on the Solana mainnet dates back to April 2022, the platform operated without its 

, SHARK, for its first two years in the market. The SHARK token was eventually launched in mid-April 2024.

Using its innovative business concept, Sharky quickly established itself as the leader of NFT lending. According to the project’s team, Sharky has a 90% share of the NFT lending market on Solana and has issued more than 1.4 million NFT loans.

Following the recent launch of its SHARK token, the project aims to integrate additional crypto asset types in the future. These include 

 (RWAs). Another ambitious product type considered for future implementation on the platform is uncollateralized consumer loans.

As a lender on Sharky.fi, you can browse NFTs from a variety of collections offered on the platform and make a loan offer for potential borrowers. The collections available on Sharky include the platform's own 

 collection, Mad Labs, Solana Monkey Business (SMB), Tensorians, Namaste and more. Lenders’ offers are shown to potential borrowers on the platform, who then choose the best offer based on their borrowing needs.

The NFT provided by the borrower is used as collateral, and the lender makes their funds available in SOL tokens. Lenders earn interest on the funds, with the loan duration typically between 7 and 14 days. Interest rates, naturally, will vary depending upon on-platform activity. Usually, 

 for active loans range between 120% and 220%, though they can go up to 360%. As such, Sharky loans are an excellent way for lenders to earn some serious interest quickly. If a borrower fails to repay the loan in full, the NFT used as collateral is transferred to the lender.

For borrowers, the Sharky platform is an excellent opportunity to access SOL funds for short-term needs quickly and flexibly using their NFTs, rather than cryptocurrency, as collateral. The best part of the platform's borrowing mechanism is that you remain in possession of your NFT during the loan period as a borrower. While your NFT is used as collateral, its ownership isn't transferred to the lender while the loan is active. The ownership transfer may only happen at the end of the loan period if you fail to repay the loan in full.

Maintaining the ownership of your NFT allows you to keep using it on various DeFi and other apps for purposes such as staking or satisfying 

 eligibility requirements, among other potential uses.

Sharx is the platform's own NFT collection. One of the most popular collections used in Sharky's lending and borrowing operations, sharx is made up of 10,111 adorable shark characters. Purchasing a sharx NFT not only opens up borrowing opportunities but also entitles you to upgrade or boost your Chowder points, rewards that are used in Sharky's loyalty program. 

As a sharx holder, you're entitled to the airdrop of Sharky.fi’s governance token, SHARK, and you can also stake sharx to earn FISHY tokens.

The newly launched SHARK token is envisioned as the platform's governance asset, with a total supply of 100 million. As of the time of writing in late April 2024, only some specific details on the actual governance processes powered by SHARK are available. Thus, the token's actual use in on-platform governance is expected to be outlined in the future.

SHARK will be airdropped in two phases, with 4.25% set aside for the first phase and 3.5% for the second. Of the former, 70% is allocated to its community, with the remaining 30% is distributed to partner communities. Meanwhile, the second phase is held as a staking pool event with a lockup duration of 30 to 60 days exclusively for OG, new users and sharx holders.

 of Sharky. Unlike the brand-new SHARK token, FISHY was issued back in 2022 at the start of the platform's operations. FISHY can be earned by staking sharx NFTs, accumulating reward points and participating in Sharky's social media campaigns. The token can be used to boost sharx NFTs, which in turn can earn you additional Chowder points. FISHY also gives you access to NFT raffles and auctions held on Sharky.

The SHARK token can be bought on Bybit through a Spot pair with USDT (

). Additionally, you can also take part in Bybit's current campaigns for the token for the chance to grab a share of the 

, which includes a Token Splash event featuring 456,000 SHARK through Apr 30, 2024, 9AM UTC, and a Lucky Draw with 58,000 SHARK in rewards through Apr 30, 2024, 9:59AM UTC.

Lending and borrowing using NFTs as collateral is a novel concept that has earned Sharky leadership positions in this niche. As more platforms adopting this business model emerge, the competition in the field is likely to intensify. However, as of now, Sharky remains the absolute leader of the Solana-based NFT lending and borrowing market. 

As NFTs experience a resurgence in popularity following the post-2021 dip, DeFi solutions that make innovative use of these assets, such as Sharky, stand to benefit. Later in 2024 and beyond, we’ll likely hear more about NFTs being used as legitimate collateral in crypto finance — a new trend helped to no small degree by the Sharky platform.

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Sharky.fi (SHARK): The Decentralized Platform for Instant NFT Loans

Candlestick

Trading

Keen on timing your exit from the volatile crypto market? Learn how to use evening star patterns to easily identify bearish reversals.

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When the crypto market corrects, it typically becomes volatile. Traders need a process to alert them to a potential correction so they can prepare for the volatility. 

, or identifying patterns and trends in market data, is the most common way for crypto traders to develop bearish alerts. Japanese candlestick patterns like the evening star pattern are popular because they can help traders exit a bullish position to lock in profits or generate a new short-sell position.

In this article, we’ll look at the candlestick pattern known as the evening star and see how to trade it.

What Is an Evening Star Candlestick Pattern? 

An evening star candlestick pattern is a three-candle formation used in technical analysis to identify bearish reversals. It consists of a large green candle, a second small-bodied candle, and a third large red candle.

The first candle of the evening star pattern is a large green candle, which suggests the bulls have complete control, pushing the market to a new high.

The next candle continues to run up to higher levels, but the strength behind the move is lacking, so the candle has a smaller body. Ideally, the second candle should gap higher on the open, but since crypto trades continuously — 24 hours a day, 7 days a week — gaps are rare on price charts.

As the market begins to sell off, it produces a large red candle. Often, the gains witnessed by the first candle have evaporated by the time this third candle completes.

These three candles together provide crypto traders with important clues about larger trends for the crypto market. The evening star pattern is generally found at the end of an uptrend, signifying the kickoff to a bearish reversal.

Strengths and Weaknesses of the Evening Star Pattern

The evening star is an effective pattern, making it a favorite of crypto traders as it helps them identify a bearish turn in the market.

One unique aspect of the evening star is that it requires three candles to generate. This makes the formation easier to identify because the candles must take a specific shape.

Additionally, crypto traders like the evening star because it helps them exit a bull market to protect profits. Once the pattern is confirmed, a trader closes all or a portion of their position.

If the trader feels a larger bear trend is going to unfold, they can consider opening a short-sell position with a stop-loss placed above the high of the pattern. Prudent risk management suggests targeting twice the distance from the entry to the stop-loss to generate a 1:2 risk-to-reward ratio.

There is no pattern or indicator that’s foolproof, and the same holds true for the evening star. Just because the pattern appears doesn’t mean that the next price move is going to be a downtrend. There are occasions when the evening star pattern may generate false signals and the market might actually rally.

One way to minimize the number of false signals is to more completely understand the pattern, its shape, and how to trade it — which we’ll explain further below.

How to Easily Identify Evening Star Patterns

The evening star formation is relatively easy to identify because there are three candles working together to tell you a story. The context and backdrop of the story are that the pattern appears after the market has already experienced an uptrend.

The first candle of the pattern appears with a large green (or white) body to extend the current uptrend. Toward the end of strong trends, FOMO can kick in: as the trend accelerates, traders and investors jump on board, afraid of missing out.

As the first candle closes, the second candle continues initially with another slight gain. However, the strength from the previous candle is losing momentum. Many of the traders have joined the trend and the buying power is diminishing.

As a result, the market produces a small-bodied candle as the battle between the buyers and sellers is fairly even. At this point, the candle could be red or green. Either one is okay, as it’s more about the small range of the candle, relative to the previous green bar.

However, it’s critical that this small-bodied candle punches a new high above the first candle. It’s this small-bodied candle that resembles a star in the night sky, giving the formation its name.

Then the third candle appears. Ideally, the third candle begins correcting lower, holding below the high of the second candle. The bullish momentum has completely dissipated from the first two candles, and the sellers take over while the buyers are nowhere to be found. As a result, the market corrects lower, fairly swiftly, erasing nearly all of the gains for the previous two candles.

Once the evening star pattern is identified, it’s fairly easy to use the formation to help you enter into new positions — or help you exit out of an existing trend. The evening star candlestick pattern signals a bearish reversal. Therefore, it can be used to initiate new short-sell positions.

In the daily BTC/USD chart above, we see the price moving up to meet the resistance at a previous swing high. Bitcoin’s price drives the first candle of the evening star pattern higher to meet this resistance level.

Then, the second candle jumps to a new high, but there aren’t enough buyers for the breakout higher to follow through, leaving behind a smaller-bodied candle. As the third candle begins to form, sellers emerge, driving Bitcoin’s price lower and starting the leg of another correction.

Once this pattern is spotted, especially near previous resistance, it signals a bear trend is about to take over. A trader would enter short on the opening of the next candle, while placing a 

To establish the target zone, take the distance between the entry to the stop-loss and multiply it by two. This product will be the distance to your target from your entry.

A couple of days later, Bitcoin corrected lower, reaching the target established by the pattern.

Using the evening star pattern to initiate new short positions isn’t the only way to implement a strategy. For traders who are positioned to the long side, the appearance of an evening star candlestick formation will signal the potential for the uptrend to terminate and reverse, starting a new downtrend.

In late February 2021, a trader positioned to buy the dip would be riding the trend higher. LINK/USDT has increased by about 40% over the past couple of weeks, reaching a new high on March 3.

However, LINK/USDT drives even higher in what appears to be a breakout attempt, forming the first candle of the evening star formation. The second candle consolidates those gains, and the breakout attempt fails to follow through, leaving behind a smaller-bodied candle.

As the third candle forms, LINK/USDT begins to correct even further, nullifying the breakout and sealing it as a false break higher.

Once this pattern is completed, especially near the previous swing high from March 3 (which was acting as resistance), then we have multiple confirmations signaling the kickoff to another correction. At this point, the long trader may decide to close their position to lock in profits.

After the evening star pattern is confirmed, LINK/USDT corrects 23%. The evening star pattern can be effective at helping traders exit long positions, as it signals a bearish reversal may be nearby. 

How Reliable Is the Evening Star Pattern?

By itself, the evening star pattern is a simple formation alerting us to the kickoff of a new correction. There are other technical analysis tools that can help increase the strength of the signal generated by this pattern.

As we’ve previously noted, when the pattern appears near resistance, it generates a stronger signal. 

 is the area on the chart where buyers stop buying and sellers start selling. Levels of resistance can be determined in advance of the evening star pattern’s creation.

As a result, if the evening star formation appears near where the level of resistance has formed, there’s a stronger signal that a bear correction is about to begin.

There are multiple types of resistance which can be generated on a chart. One of the easiest to identify is a horizontal level of resistance. Our previous illustrations using Bitcoin and LINK, above, show how powerful the evening star pattern can be when combined with horizontal resistance.

Another easy form of resistance that can be determined on a chart is a moving average.

Above, we have a 4-hour price chart for Bitcoin with a 50-period simple moving average included. As Bitcoin’s price breaks below the moving average, it briefly rallies to reach the underside.

The evening star candlestick pattern appears right at the moving average, signaling a deeper correction is likely to continue. Bitcoin ends up correcting another 7% over the next day.

Evening Star Pattern vs. Other Trend Reversal Patterns

There are several other bearish reversal patterns which crypto traders follow. Let’s look at how the evening star pattern compares to the head and shoulders, bearish harami, and triple top patterns.

 is a popular reversal pattern followed by crypto traders. There are several differences between the head and shoulders pattern and the evening star.

The evening star pattern develops in three candles, while the head and shoulders may take more candles to develop. Actually, it’s impossible for the head and shoulders pattern to develop in fewer than five candles. The head and shoulders pattern actually forms three smaller tops within the larger pattern, and therefore needs more candles to complete the pattern. 

On the other hand, the evening star pattern will take the shape of one rounded top.

As a result, it’s possible for the evening star to be a portion of the head and shoulders pattern, but the head and shoulders pattern cannot be a part of the evening star.

 is another favorite pattern among crypto traders. However, there are distinct differences between it and the evening star.

The biggest difference between these popular candlestick formations is that the evening star forms in three candles, while the harami forms in two.

Additionally, the high point of the evening star pattern is the second candle. On the other hand, the high point of the harami is in the first candle.

Of course, the second candles of both the evening star and bearish harami are small-bodied candles. However, the evening star’s second candle becomes the high point of the pattern, whereas the second candle of the harami gaps lower to form inside the body of the first candle.

There are a few differences between the evening star and triple top patterns.

 takes place in a sideways range. This means that price is trading sideways as each of the three tops is formed. On the other hand, the evening star is created after an uptrend, not in a sideways range.

Secondly, the triple top requires a minimum of five to six candles to create. The evening star pattern is a small three-candle formation.

Finally, the evening star candlestick pattern could be included within the triple top pattern, but never the other way around. The triple top is the larger pattern, and requires three tops to form, whereas the evening star is just one rounded top.

The three candles of the evening star candlestick pattern make it easy to spot and identify on a market chart. The evening star can help traders exit a bullish market or establish new 

 trading opportunities. Sometimes the evening star can generate false signals, but when combined with other forms of technical analysis, such as horizontal resistance, it can reliably be used to signal a new downtrend. 

Candlestick Patterns Professional Traders Use

 – A curated list of candlestick patterns most frequently used by traders

 – Learn the basics of candlestick patterns

 (Chart basics: trend, neckline, wedges)

Evening Star Pattern: How to Identify a Bearish Reversal in Crypto

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