Bitcoin’s Oversold Reading Signals Bearish Momentum
Bitcoin’s relative strength index (RSI) has dropped well below 30, indicating extreme oversold conditions. This is the strongest oversold reading since March 2020, during the coronavirus-induced crash. The RSI is a momentum indicator that shows an asset’s recent price movement relative to its average movement over a specific period.
Key Points:
– Bitcoin’s RSI dropping below 30 reflects oversold conditions, meaning the price has dropped too quickly compared to its recent average.
– An RSI reading above 70 indicates overbought conditions.
– Many in the crypto community mistakenly believe oversold and overbought readings indicate impending bullish or bearish reversals. However, oversold readings simply mean prices have dropped too quickly.
– The current below-30 RSI reading suggests strengthening bearish momentum for bitcoin.
– Alex Kuptsikevich, senior market analyst at FxPro, believes bitcoin’s trend has shifted to bearish, with a potential decline to $24,700.
Bitcoin is currently trading at around $26,000. Last week, prices fell over 10% due to surging bond yields, particularly the 10-year U.S. inflation-indexed security, which reached its highest level since 2009.
Hot Take
Bitcoin’s oversold reading on the RSI indicates a strengthening bearish momentum. It is important to understand that oversold and overbought readings are not predictive of market reversals. This reading suggests that the price has dropped too quickly, and there is potential for further decline. With the shift to a bearish trend, bitcoin may face further challenges, potentially reaching $24,700. The impact of surging bond yields on risk assets, including cryptocurrencies, is evident in the recent price movement of bitcoin.
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