Bitcoin’s Recent Correction and Potential for Upside
The price of Bitcoin experienced a significant correction of 20% following the launch of the first spot ETFs. However, there is a popular momentum indicator called the Relative Strength Index (RSI) that suggests the potential for a strong upward continuation if a specific level is surpassed.
Understanding the Relative Strength Index
The RSI is a tool used to measure momentum in a market and identify when it becomes “overbought” or “oversold.” In the case of Bitcoin and other cryptocurrencies, an RSI reading above 70 often indicates that the asset is entering a powerful phase.
Potential Overbought Scenario for Bitcoin
Currently, the weekly RSI for Bitcoin is just below 70, indicating the possibility of surpassing the overbought level. To achieve this, BTCUSD needs to maintain a price above $43,650. If successful, it could result in a close above the threshold.
Examining Historical RSI Data for BTCUSD
An analysis of historical data reveals that Bitcoin has seen 13 instances in the past decade where the 1W RSI closed above 70. The average gain after surpassing this level was approximately 107%, with returns ranging from 20% to over 400%.
After removing outliers, the average gain falls to around 61%. This suggests that Bitcoin could potentially experience a move between 61% and 107%, translating to prices around $68,000 to $90,000 per coin. Additionally, there are indications of a bull flag pattern with a target around $77,000.
Hot Take: Bitcoin’s Potential Upside
The recent correction in Bitcoin’s price may be temporary, as the RSI indicator suggests the possibility of a strong upward trend. Historical data shows that when BTCUSD closes above 70 on the weekly RSI, significant gains have followed, with an average increase between 61% and 107%. If Bitcoin maintains its momentum and surpasses the overbought level, it could potentially reach new all-time highs above $90,000 per coin. Keep an eye on Bitcoin’s price action and RSI to gauge its future performance.
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