Bitcoin’s Rally Raises Concerns of Overbought Market
Bitcoin has been experiencing a consistent rally in recent weeks, surpassing several resistance levels. However, there are some worrisome signs that investors should be aware of.
Technical Analysis
By TradingRage
The Daily Chart
On the daily chart, Bitcoin’s price has surged towards the $52K resistance level after rebounding from $40K in January. However, the Relative Strength Index (RSI) is showing an overbought signal, indicating a potential consolidation or correction in the coming weeks. The $47,500 level could act as support and prevent a significant drop.
The 4-Hour Chart
Looking at the 4-hour timeframe, Bitcoin’s price is currently hovering around the $52K resistance level. The market structure remains bullish with higher highs and lows. The RSI in this timeframe is above 50% but has not reached overbought territory yet, suggesting further upside potential in the short term.
On-Chain Analysis
By TradingRage
Bitcoin Open Interest
As Bitcoin’s price continues to rally, traders are flocking back to the market. The open interest metric, which counts the total number of open futures contracts, has seen a significant spike. While this is expected in a bullish market, an extreme spike may lead to increased volatility and the possibility of a rapid drop due to long liquidation. Investors should exercise caution and manage their risk accordingly in the short term.
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